ON THE FOLLY REWARDING A WHILE HOPING FOR B

Author: Steven Kerr

Presented by: Robert Montalvan

STEVEN KERRPhD, City University of New York

•Goldman Sachs, Chief Learning Officer

• General Electric – Crotonville, Vice-president of Corporate Leadership Development

• The Ohio State University, Associate Professor of Organizational Behavior

• University of Michigan

• University of Southern California, Dean & Director of PhD program

“Managers who complain about lack of motivation of their workers might do well to consider the possibility that the reward systems they have installed are paying off for behavior other than what they are seeking”

Steven KerrAcademy of Management

Executive, 9(I), 1995

GOAL DISPLACEMENT:

“Goal displacement results when

means become ends-in-themselves

that displace the original goals”

EXAMPLES OF GOAL DISPLACEMENT (1):Assume that the president of XYZ Corporation is confronted with the following alternatives:

1. Spend $11 million for antipollution equipment to keep from poisoning fish in the river adjacent to the plant; or

2. Do nothing, in violation of the law, and assume a one in ten chance of being caught, with a resultant $1 million fine plus the necessity of buying the equipment

EXAMPLES OF GOAL DISPLACEMENT (2):

World Bank claims repeatedly that its main goal is to fight poverty in the Third World.

But in reality, to stay in office the World Bank must lend a great deal of money (23 billion) with no cheap interest

EXAMPLES OF GOAL DISPLACEMENT (3):

A Texas public school district have “cheated” by liberally exempt certain students to take standardized tests on the hope of raising overall district pass rates.

John Bohte, Oakland UniversityKenneth Mier, Texas A&M University

COMMON MANAGEMENT REWARD FOLLIES (1):

Hoping for: while rewarding:

Politician addressing operative goals

politician involved in official goals

A soldier to obey orders soldier’s disobedience

Doctors will not incur in type 1 error (labeling a well person sick)

Type 1 errors (seen as normal in medical practice, increased income), i.e Tuberculosis diagnosis ratio of 50:1

Orphanages goal’s: place children in good homes

Not giving children away (staff size and budget depend on number of children)

Vocational Rehabilitation: help individuals to find permanents jobs

Pays off number of individuals placed for only 60 days

Source: Steven Kerr

COMMON MANAGEMENT REWARD FOLLIES (2):

Hoping for: while rewarding:

Teacher not neglect teaching responsibilities

Research and publications

Transfer knowledge from teacher to student reflected in grades

grades are much more important than knowledge

Companies not pollute environment

Managers that avoid anti-pollution additional measures or expenses

To evaluate training efforts in companies

Ignorance in this area (the ones responsible for conduct evaluations are the same ones that deliver the training)

Long-run costs Short-run sales and earnings only

Source: Steven Kerr

COMMON MANAGEMENT REWARD FOLLIES (3):Hoping for: while rewarding:

Team work and collaboration, (all-for-one spirit)

the best team members (advertising endorsements)

Innovative thinking and risk taking

Proven methods and not making mistakes

Development of people skills Technical achievements and accomplishments

Employee involvement and empowerment

Tight control over operations and resources

High achievement Another year’s effort

Government expects prudence on agencies’ spending

spending itself, not economy (cut back on not used funds for following year).

Source: US Academy of Management

CAUSES OF FAULTY SYSTEMS:

• Fascination with “objective” criterion

• Overemphasis on highly visible behaviors

• Hypocrisy

• Emphasis on morality or equity rather

than efficiency

PERFORMANCE SYSTEMS:MARK GRAHAM BROWN (1996)

“The most common mistake organizations make is measuring too many variables. The next most common mistake is measuring too few”

PITFALLS OF MEASURING SYSTEMS (1):

1. Amassing too much data

2. Focusing on short-term

3. Failing to base business decisions on the data

4. Dumbing the data

5. Measuring too little

6. Collecting inconsistent, conflicting and

unnecessary data

7. Driving the wrong performance

PITFALLS OF MEASURING SYSTEMS (2):

8. Encouraging competition and discouraging team work

9. Establishing unrealistic and/or unreasonable measures

10. Failing to link measures

11. Measuring progress too often or not often enough

12. Ignoring the customer

13. Asking the wrong question / looking in the wrong place

14. Confusing the purpose of the performance management system

PERFORMANCE MANAGEMENT SYSTEMS:

High-involvement management is suppose to:

• Develop skills in employees• Reinforce good performance• Provide feedback• Follow-up on unacceptable performance

SOCIAL REINFORCEMENT THEORY

Social behavior results from situations and encounters that are either rewarded or punished as an individual matures from childhood to adulthood

CAUSES OF FOLLIES:1. An inability to break out old ways of

thinking about reward practices

2. Lack of an overall system of performance factors and results

3. Continuing focus on short term results by management and shareholders

4. Partnering something in which we do not wholly believe

TYPES OF REWARDS:

• Extrinsic rewards: pay, promotion or fringe benefits. These rewards are mainly cash • Intrinsic rewards: are part of he job itself. The responsibility, challenge and feedback characteristics of the job. Such rewards (non-cash) are more effective motivators

HYPOTHESIZED MODEL OF ORGANIZATIONAL COMMITMENT (RICHARDS STEERS – UNIVERSITY OF OREGON) :

PERSONAL CHARASTERISTICS

(need for achievement, age,

education)JOB CHARASTERISTICS(task identity, optional interaction, feedback)

WORK EXPERIENCES(group attitudes,

organizational dependability, personal

import)

ORGANIZATIONAL

COMMITEMENT

OUTCOMESdesire to remainintent to remainAttendanceemployee retentionjob performance

COMMON ERRORS ON PERFORMANCE MANAGEMENT (1):

• Similar to me• Positive leniency: want to give everyone higher scores• Negative leniency: want to give everyone lower scores• Halo effect: the employee is a “saint” so must have higher scores• Attribution: tending to see poor performance as more of an influence of external factors• Stereotyping

COMMON ERRORS ON PERFORMANCE MANAGEMENT (2):

• Contrast effect: contrasting one employee’s accomplishments against another• First impression• Central tendency: forced bell curve (expecting in any group that there will be some poor employees and some great employees)• Recent effect: over emphasis on recent performance• Negative approach: catching them doing something wrong instead of catching them doing something right

(Ohio University Performance Management System guidelines)

MANAGER/SUBORDINATE DIVERGENT GOALS AND MOTIVES:

Possible remedies:

1. Selection of individuals that are consonant with the organization’s goals

2. Training to alter those personal goals

3. Altering the reward system

ADVISE:Next time that you are not getting the results that you want in your business, seriously evaluate what are you rewarding. You cannot get what you want until you stop “hoping for A while rewarding B”

BIBLIOGRAPHY:1. Brayfield, Arthur & Crokett: Employee Attitudes and Employee

Performance, Psychological Bulletin. 52(5), 1955

2. Bohte, John & Mier, Kenneth. Goal Displacement: Assesing the Motivation for Organizational Cheating. American Society for Public Administration, 2000

3. Department of Energy: Performance Management Handbook, 2001

4. Kerr, Steven: On the folly rewarding A, while hoping for B. Academy of Management Journal 18(4), 1975 <Original version>

5. Lawler, Edward: Rewarding Excellence

6. Steers, Richard: Antecedents and Outcomes of Organizational Commitment, Administrative Science Quarterly, 1977