One summer I worked in a warehouse moving freight onto trucks. It was a simple job of moving stuff from one truck that had just arrived onto another truck that was about to leave. We were measured by the weight of what was moved and how fast we could move it. The more weight we moved and the faster we moved it, the more money we made. And, like my fellow loaders, money was pretty much all that mattered. So we scurried around the warehouse moving freight as fast as we could – that’s what we were incented to do. We loaded pallets of steel on top of stereos. We stacked pallets of glassware so high it was sure to tip over. We didn’t think too much about what would happen when the loaded truck arrived at the final location. Insurance costs and damage must have been through the roof. The incentives instructed our behavior and, although I am now embarrassed by it, we “gamed” the system. A bunch of people were later fired for excessive damage to freight.
More than once I have been in a call center in which the customer support people are measured by the number of calls taken and the length of the call. In short, the less time spent on the call, the more likely that the goal will be reached and that incentives will kick in. It is a formula that leads to the support people hanging up on customers in order for incentives to pay out. Support people quickly figure out how to game the system at the expense of the company. And more than once, I have seen people fired in call centers after customer complaints.
Wells Fargo just recently received a $100 million penalty from the Consumer Financial Bureau, because of the illegal practices of its employees. As we have all heard the infractions include secretly opening unauthorized accounts for customers. The 5,300 Wells Fargo employees that were involved have since been fired. Wow, what a mess. Now the CEO and Chairman is forfeiting his bonus of $41 million.
The question everyone is asking is: How could so many people get caught up in such a bad thing? Try looking at the incentives.
I am not an expert on the Wells Fargo situation and the Company is full of good people…but I do know this: When there are goals that are tough to achieve and incentives that only kick in when goals are met, it’s a situation ripe for gaming.
Goals and incentives can make for a complicated equation that leads to all kinds of behaviors. Good and bad. If the incentives are off, chances are the whole organization might be tipping toward big problems. So many dashboards exist today that someone should see incentive problems early.
Setting goals with incentives that match can be magic. Make the magic work for you.