Eric Budd, lead instructor at CQI Academy, a Lansing-based nonprofit that promotes strong management practices, spoke with DBusiness Daily News about the danger of “rewards for performance” programs and how to evaluate decisions made by employees.
1. DDN: What trends are you seeing in management practices?
EB: There are some things that you see all of the time in the news, such as the impact of rewards for performance. One of the most interesting cases has been the misrepresentation of data in the Veterans Administration’s health centers (regarding the length of wait times for patients to see doctors). Some news stories have indicated that the employees’ annual evaluations or performance incentives were related to those numbers.
When you tie someone’s advancement opportunities or their compensation to a particular number, they’ll do what’s necessary to reach that number. There are three options to do that. One is to improve the system. If you can’t improve the system, which sounds like (the VA centers) were unable to do that, what you’re left with is to either distort the system or distort the figures. And it sounds like what they did was distort the figures.
2. DDN: What complications does this introduce?
EB: With incentives, pay-for-performance kind of things, we find that it introduces motion but not motivation. So the minute that extrinsic motivator goes away, usually the motion does, too. There are also studies that show you reduce the kind of things that most organizations are looking for when you introduce extrinsic motivators. Creativity diminishes. Teamwork diminishes. Cooperation diminishes. Competition within the organization increases. So there’s a variety of damaging influences that we find with some approaches for incentive programs.
3. DDN: How can business leaders motivate their staff?
EB: Each organization is unique, so it’s pretty rare that there’s a perfect prescription that works for everyone. (At the academy) we discuss some key principles: appreciation for a system, understanding variation, theory of knowledge, and psychology of people. So we present the theories and a set of tools that help apply those theories. We then ask people to look at their own situation, their company culture, and begin to apply those principles in those settings.
4. DDN: Are you bringing a very academic approach to the workplace?
EB: In business, we don’t talk about theories very much, if at all. That’s more of an academic term. However, our decisions are essentially our theories or predictions. We think if we take an action, we’re going to get a beneficial result. While we make predictions all the time, what we typically don’t do is test them as though they were theories to be confirmed or disproved. We make a decision and then go on to the next decision. We don’t look back and ask, “Was that a useful decision? Was the theory that we used to base that decision upon valid or do we need to modify our theory and our understanding of how our business, our customers, and our people are working together?”
5. DDN: How can a person evaluate their decisions?
EB: You can design a small test, learn from it, and then make a change based on one of the theories to improve it. We had a survey where our employees said they didn’t feel like they were getting enough opportunities to participate in the decisions of the company. So we said, “How about we hold a monthly company meeting, where we discuss the major business and talk about what’s happening? If we do this, we think people will be satisfied with their level of participation because they’ll get an opportunity to interact with the decision makers and the decisions.”
We started that about a year and a half ago, but rather than just hold the company meetings and not ask any questions, we went back and said, “How are we doing?” That was one way for us to evaluate the decision to hold the meetings.