Incentives matter. Rewards motivate people to behave in certain ways. Using incentives, therefore, is one great way to influence the form, direction and intensity of how people act.
Goals also matter. They help us clarify where we’re headed and how to focus our efforts. Setting difficult, specific goals, therefore, is one of the best ways to motivate yourself and others (see the numerous studies on the topic, particularly those by Gary Latham and Edwin Locke).
But goals and incentives can—and sometimes do—run amuck.
And when that happens, it’s often in the form of “rewarding A while hoping for B,” a topic described thoroughly in the classic management article by Steven Kerr.
That is, we often forget that it’s not just about what you’re rewarding formally; it’s also about what you’re rewarding informally. And it’s in the unintended informal rewards that we can run into trouble.
Here’s a simple example: You assign a task to one of your direct reports. He quickly responds with a sub-par product with multiple errors. You’re frustrated, but you know that you can fix the errors about 10 times more quickly than he can. So you tell him that it’s not sufficient, but then you go ahead and fix the product yourself—leaving him with no more tasks to complete that day.
What have you done?
In addition to missing a training opportunity, you’ve informally rewarded your direct report for sub-par effort. By not having him go through the pain of fixing the problem, he now knows that he can get by with little effort. That leaves you at the office at 7 p.m., while he’s already home or at happy hour.
Did you mean to reward poor performance? Of course not. But in a way, you did.
Here’s another simple example: You set a team goal of 1,000 error-free shipments of one of your new products. If that occurs, everyone on the team will receive a $3,000 bonus. One of your people finds an error after one of the products ships, but it’s an error that the customer might not notice for quite a while. Have you rewarded that employee to speak up and report the problem, or have you rewarded silence?
Here’s a bigger example: Wells Fargo. As you likely know, between about 2011 and 2016, the company set goals for its lower-level bank employees to sell additional products to its customers—a practice known as cross-selling. There’s nothing inherently wrong with that. What company doesn’t want its customers to purchase and use more than one or two or three or more of its products or services?
But what happened at Wells Fargo is that the incentives and goals were such that people—more than 5,000—found numerous “creative” ways to cross-sell. These methods included widespread opening of accounts for customers who didn’t request them and even using fake customers to pad one’s sales numbers.
Here’s a Wall Street Journal recap of some of the highlights.
Clearly, this was an error of management and leadership at a grand scale. It’s hard to claim that such a problem might be due to a few “bad apple” employees given that at least 5,000 were involved.
Instead, it’s the barrel—the system. And in particular, it’s the incentive and goal-setting systems set in place by senior leaders—the “barrel makers.” They, along with the direct violators, are culpable.
Incentives and goals are important aspects to guiding people’s effort at work. When properly aligned with organizational objectives, they can powerfully harness people’s ingenuity for the good of the team.
But it’s equally important to remember that incentives and goals may have unintended consequences. So let’s be on guard for those ways—both big and small—in which we might be “rewarding A while hoping for B.”
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