In my last post, I wrote about the dangers of failing to have any targets at all. I suggested this could breed belligerent clock watchers if employees were not challenged by some degree of accountability. In the weeks since then, we have seen (in Australia) public scrutiny of banks and one large insurer and the results of setting targets that breed other forms of destructive behaviour, such as greed, dishonesty and the gouging of customers.
And this all highlights one of the greatest challenges for managers. How do you set up a fair but inspiring reward system? How do you decide who gets what and who gets promoted? Every time a company hands someone a discretionary payment, they are saying ‘well done,’ and every time there is a promotion, the organisation is signalling that this person’s standards are acceptable and normal.
I only know one thing for certain and that is, putting human beings on an equal footing, no matter their effort, is also demoralising and is not a solution. Human beings bring their efforts into line with the lowest common denominator. Most of us will not collude in being ignored for going the extra mile for very long. We have had to look out for ourselves in order to survive. What’s in it for me? is still the biggest question swirling in our minds when we consider whether and where to invest our energy.
And so there needs to be some way of knowing the good performers from the mediocre or under par. But we are emotional creatures and when it comes to deciding between who is doing a good job and who is not, we may be prone to bias. We may not be clear sighted when we look at real outputs. We may place emphasis on the wrong results. It happens. A system that only looks at hard measures, may completely ignore other critical behaviours in a workplace, such as quality, innovation, moral courage, clear thinking, decisiveness, kindness and steadiness of character.
How reliable are hard measures? An employee asked why he didn’t receive a larger bonus than his contemporaries, since he had worked on profitable projects and ‘some of them have worked on losers!’ It almost sounds logical until you consider the long-term effect of following his train of thought. Firstly, how could we attribute his individual actions to that profitable project? How could we blame his colleagues for the loss makers? In the longer term, if we followed his suggestion, how would we ever persuade good employees to apply themselves to projects that were in trouble? Why agree to go if you know you will face financial punishment.
What happens when we try to value ‘effort’ – a more intangible work place quality? Managers can easily confuse concern and busyness with an unhelpful flap and panic merchant behaviour. And the reverse can occur; the cool and collected can be punished for being ‘too casual.’ A colleague once insisted that her assistant was worth a bigger raise that anyone else’s. Why? “Because she often works late.” She worked later because my colleague was a terrible time manager and left everything to the last minute. The assistant stayed back to sort out the mess. The assistant got the bigger pay raise. The colleague’s behaviour was not addressed. The other assistants were demoralised, not surprisingly. It was a bad day for the good planners.
It is no simple thing to get this right. Whenever you decide what outcomes deserve reward, you have to consider what could be neglected in that pursuit, because rational people will align their effort in the direction of the reward. They are not stupid. If I am rewarded for individual results, you can forget my interest in teamwork. If I am rewarded for finishing a project on time, I might not care about the short cuts I am taking to beat the clock. If you furnish me with a special bonus for keeping safety incidents low, don’t expect me to report them all or even notice them. Wilful blindness might take over.
The setting of objectives that are tied to rewards is not just a problem for business. The fallout can affect everyone. Schools can and do turn away children that they assume will drag down their metrics if they are ‘paid for performance’. I have lived through this in the UK and can attest to the cruelty of such systems, designed to reward grades but causing the rejection of children with special needs. A colleague recently told me about Sydney schools that are encouraging some students to stay home on the days of basic skills testing, so as not to damage their ratings. Ratings go into newspapers. Schools worry about attracting students, or rather, parents with deep pockets.
Many of us have grown tired of the expression “what gets measured gets done.” Not everything that is measured or measurable is valuable. Or to put it another way, not everything that can be counted counts, and not everything that counts can be counted. We take enormous risks if we do not set targets with great care and do some critical thinking about the unintended consequences that can impact us all.