About a decade ago I was working for a large business, and offered the role of chair of the quality improvement committee. I turned to my father-in-law, David Ellinghausen, for advice. David had been a quality engineer for the automakers most of his adult life. He was happy for me and gave me great counsel.
He also pulled me aside, off from the rest of the family, and told me something like this:
“Matt, people are smart. They notice what the big boss is doing. If he is involved in your initiative - if he is reading your reports, finding time for you, initiating corrective action at his level -- then people will respond, because they want to please the big boss.
If the boss is too busy to read your reports, if he wants someone else to take care of the problems, if your job is to make quality ‘go away’ so he doesn’t have to worry about it -- and he rewards people doing other things, not those getting ‘bogged down’ wasting time on your committee, well, then, people will give your committee all the attention is clearly deserves.”
He was right.
When I started to read the textbook about the American ‘adoption’ of the Japanese Quality Revolution, I saw the same things, over and over: In Japan, the CEO is the Chief Quality Officer, and goes to the quality conferences and pores over the reports -- then goes to the factory floor to see for himself.
In the United States, the Executives quickly found ‘other’ people to ‘do that quality stuff", so they could get back to the busy business of production . As a result, American Cars in the late 1980’s got all the improvement they deserved.
What I am trying to say here is that people respond to consequences. The reward can be as simple as a smile and a thank-you from the boss, or, equally simply, a look of anger and disappointment.
I remember once, getting a don’t-you-dare-answer-that look from one manager when an executive asked me a straight yes-or-no question. Why did my manager look at me that way? Because "the look" worked -- at least often enough to be useful.
The Man In The Arena
Take a good person, one that is trying to do right by the customer, by the team and by other departments. Now drop that person into a dog-eat-dog, rewarded-for-cheating system where no one gets caught.
You can bet that, bit by bit, they will be sorely tempted to conform to the system and turn into a bad person.
Now, when the cheating starts, the ignoring of rules, it will start with something small. Perhaps our 'good person' forgot to punch the time card, and called from his cell phone, fifteen minutes later, to have a friend punch it for him.
Caught at that time, there’s no foul. A spot correction from a supervisor, and our hero will apologize profusely and seek to prevent it.
But say our hero isn’t caught. And say the supervisor approves. The surpervisor even offers to punch our hero's time clock an hour after he leaves -- an hours pay for nothing! If our hero will only do the same for the supervisor tomorrow. Not to mention nap time from twelve to three.
Like I said, come back in twenty-four months.
This is what I mean by incentives, and it’s more than lazy work -- it is lazy thinking, over simplified process, overly simplistic models for how we do our work.
Can you imagine trying to do real risk management when everybody else just takes the deadline, divides by four, and calls the phases require/design/code/test ? When you pull out your risk-adjusted plan and are told to go make a Gantt chart?
I’ve done it. It isn’t much fun.
This is what I mean by incentives: People inside a system figure out what they need to do to advance, and they do it, even if, outside the system, they found the behavior distasteful or immoral.
A Second Way to Look At It
Behavioral Psychology tells us that positive, immediate, and certain rewards are more powerful than negative, long term, and certain consequences. (Page 19)
This explains why smokers have such a hard time quitting, I have such a hard time turning down yet another Mountain Dew, and why organizations that don’t notice and correct bad behavior get more of it.
There is Some Hope
There are exceptions. Often I find the people who can stand up against the wrong kind of rewards are experiencing a sort of mental brain trick -- they want something else more. Perhaps the pride of an old mentor, a father, or an honor code from an old school they took seriously.
Perhaps it would be better to say that people respond to consequences, though the best of us are better able to weight those short-term consequences with something more abstract and long-term.
Most importantly, when I read that behavior psychology literature, I get the strong impression that humans are lab rats in a maze, to be treated with the right stimulus in order to get the right response.
That’s kind of a dehumanizing way to look at the world, isn’t it?
And Now ... About Incentives
When I say that people respond to incentives, smart people, people I respect, often look at me as If I had grown a second head, as if I "just don't get it."
After all, haven't I read the literature? Haven't I thought about it? Carrot-and-stick Incentive systems never work. They convert intrinsic motivation(doing something because it is a good thing to do) into extrinsic motivation, where you work just hard enough to get the carrot or avoid the stick. The academic research that Daniel Pink popularized shows that while financial incentives can improve performance for some menial tasks, like carrying wood, they fail when faced with knowledge work. His conclusion: Under pressure to perform, people’s thinking can actually deteriorate with large rewards.
Add to the mix Esther Derby’s recent excellent article on the insulting nature of extrinsic rewards, or Barry Swartz’s TED Talks on practical wisdom or doing the right thing,on doing the right thing, W. Edwards Deming’s list of management ills (including #3 the annual review and #5 management “by the numbers” alone), and it becomes obvious that incentive systems, even well-meaning, well-reasoned ones, end up doing more harm that good.
Why, you'd be better off following the advice DeMarco and Lister gave in PeopleWare twenty-five years ago: Pay your people enough that they don’t have to worry about money, and get them energized about building something great.
I agree with all of this. Human beings are not lab rats to be manipulated with a piece of cheese.
There is something else -- call it free will, call it the dignity of man, call it intrinsic motivation, but something else to appeal to from which high performance springs.
All this 'incentive' stuff is bunk.
And yet ...
... and yet.
In my mind, I keep coming back to the original examples, the ones that opened the article, the Quality Assurance Committee or the human quitting smoking.
In a very real way, we are all living in an incentive system, and that incentive system does impact how we perform.
It is also an incentive system that you can not escape.
When I say that "people respond to incentives", it is in this greater sense that I mean the term.
Reconciling Incentives and Incentives
When I look at Esther’s Post, something strikes me.
Save the company a million dollars, get a gift card for twenty-five. Make the the company half a million, get a half-day off or a coffee mug.
These are all profoundly disproportional rewards.
I wonder: If the people got 25% of the money they saved the company, would the offense be quite as much?
In his book Outliers, Malcolm Gladwell lists three motivators for creating a high achiever: autonomy, mastery, and a connection between effort and reward. This is not too different than what Daniel Pink recommends in Drive -- Autonomy, Mastery, and a sense of purpose.
It is the connection between effort and reward that gets me. Galdwell’s classic example is the rice-paddy farmer in Asia, for whom forty versus sixty hours of work a week means a tangible difference in rice harvest, but he also lists musicians, hockey players, and business people.
All of these folks are swimming in a system that is essentially piece-rate, where the graphic artist, the web master, the plumber, and the electrician are paid by the job, not by the number of hours it takes them.
When you combine reputation with piece-work, you can get a virtuous system that rewards excellence.
Sadly, most companies in the United States just are not set up this way. The cliche is true: In order to find one, I had to start my own.
The Bottom Line
We can’t avoid incentives, they are all around us. Managers can make spot corrections, especially when they are small and less painful. Leaders at every level can set examples for behavior, de-emphaize reward and punishment and re-emphasize pride in work.
All of us can pay careful attention to the difference between what we say and how we act, to try to design the tiny systems of who we interact with to be virtuous, not viscous.
Let us all endeavor to press on, to strive to find the good and strive more to do it -- and encourage others to do it as well.