Imagine this scenario.
Your 103 pound slobbering Labrador Retriever Goofy (name changed to protect the guilty) is sitting around the house one day bored and hungry — a perpetual state of being. For no particular reason (is there ever?), he jumps on the couch and stares at you with a self-satisfied grin.
“No! Off!”, you urge, but Goofy stands pat with a defiant tongue dangling well below his jowls. Thinking you can outsmart the beast, you say: “Goofy, do you want a dog bone?” Within nanoseconds, Goofy is at your side, drooling helplessly as you dig a dog bone out of the bin.
The next day, Goofy is once again bored and hungry and looks expectantly at you for a treat. But alas, you’re too busy pounding out text messages on your iPhone. Then Goofy gets an idea — when it comes to food, he’s shrewd — and repeats yesterday’s transgression. The plot replays like groundhog day.
Congratulations! You’ve just trained Goofy to jump on the couch whenever he wants a dog bone, which is, like, all the time.
This is of course a case of incentivizing the wrong behavior. And business leaders make this same mistake at least as often as dog owners. Why? There tends to be a couple of reasons:
1. Unintended consequences of well intentioned but misguided incentives
The first explanation is the most benign. In these cases, managers simply fail to think through the logical consequence of their directives.
In retrospect, you may think some of these examples are ludicrous knowing in advance that I’m highlighting incentives that backfired, but I can assure you that each of these situations draws on real world examples — and there are plenty more to choose from.
2. Disingenuous unwillingness to incentivize allegedly desired behaviors
Dogs learn early on to watch what their owners do, not what they say. They are after all, dogs.
A common example of this same phenomenon in business is when executives disingenuously say the politically correct thing about their priorities but blatantly and knowingly incentivize contrary behaviors. Examples abound.
When there is a clear disconnect between stated objectives and incentivized behavior, institutions lose credibility and authenticity in the eyes of their customers and employees.
As I put the finishing touches on this blog entry, my Labrador Retriever is besides me, where else, but on the couch. My protestations not withstanding, I lost credibility a long time ago on canine couch rights with my misguided incentives.
After 40 years in management consulting and venture capital, I joined the faculty of Columbia Business School, teaching courses in business strategy and corporate entrepreneurship
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