Opinions wanted on career-limiting moves (<g>)
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From: larwe on 16 Apr 2010 14:15 On Apr 16, 1:48 pm, Tim Wescott <t...(a)seemywebsite.now> wrote: > > Or did I miss your point? Feedback... er, "comments" welcomed. > > OTOH, bonuses based on revenue, without looking at the long term effects > of the sales methods used, can be very self defeating. There are two *very* simple rules here: 1) People tend to repeat behaviors for which they're rewarded. 2) Any rigid structure of rules encourages people to avoid the bars and head for the loopholes, and the more complex the structure the more loopholes exist. In other words, for any nontrivial analysis, tell me your metric and I'll make my numbers indicate I'm a golden god according to that metric(*). Anyone who works at a BigCorp becomes very good at this (or stays on the bottom rung, maybe on a PIP, for his whole life). We have this discussion every year at performance evaluation time, when clearly worthless employees are allowed to stay in the middle or upper tier, while people who aren't favored (or aren't sufficiently political players) are left on the bottom. (*) Six sigma helps ;)
From: Frnak McKenney on 17 Apr 2010 11:06 On Fri, 16 Apr 2010 10:48:02 -0700, Tim Wescott <tim(a)seemywebsite.now> wrote: > Frnak McKenney wrote: >> On Thu, 15 Apr 2010 14:22:28 +0100, Andrew Jackson <alj(a)nospam.com> wrote: [...] >> A bonus or commission is, as far as I know, intended as a way of >> reinforcing Good Behavior ("That was very helpful. Do more of it!"). [...] >> And, once you accept that you want your Sales guys Selling, then >> you both want to encourage them to Sell More, and you go looking >> for guys who will respond well to your incentive program. I'm >> not sure if it's a _completely_ self-fulfilling prophecy, but I >> do think that there is a loop and some feedback in it. <grin> >> >> Or did I miss your point? Feedback... er, "comments" welcomed. > > OTOH, bonuses based on revenue, without looking at the long term effects > of the sales methods used, can be very self defeating. Agreed, they _can_ be. But doesn't that same caveat apply to _any_ form of incentive? Conside the consequences of offering a HR staff member a bonus based solely on the number of new hires, or an assembly line worker rewarded for the number of cars rolled out. Rewards and bonuses -- incentives -- tend to produce more of the same activity, just as penalties (and taxes <grin>) tend to reduce it. If you make calculating them too difficult, you will lessen their impact, but if you don't make sure that the behavior that they actually reinforce is what you want you'll wind up with Unintended Consequences. (Before we get too abstract, I'd like it clear that my original posting was intended to point out that there were valid reasons for offering incentives tied to revenue generated, not to argue that any specific program always worked as expected. <grin!>) > Bonuses will encourage the sales guy to sell the customer more stuff, > and more expensive stuff, than the customer way want. With a smart > customer, this will lead to resentment and fewer sales later. Bonus plans _can_ have that effect. > Bonuses based on the gross price of the sale, yet that require expensive > modifications to the product, will encourage sales folks to "sell > anything", possibly leading to the company going into a "we lose money > on each sale, but we'll make up for it in volume" death spiral. Bonus plans _can_ have that effect. > At one point, my dad decided that he would give his piece-part > production employees bonuses on a per-part basis. Production shot up! > Woo-hoo! Rejects and customer returns shot up! Oops. He sorted it out > (to everyone's benefit) by giving bonuses for parts _after_ they passed > QA. So your father replaced a bonus plan that had unintended (and undesirable) consequences with one that reinforced behavior that had a positive effect on the company. Sounds good. > The point is that folks will follow the money, and giving bonuses can > easily backfire. While they are a good tool to have in the box, you've > got to be careful about what you use them on. Agreed; you need to monitor your results to see if you're heading in the direction you originally intended. This applies to any form of incentive: bonuses, taxes, even "applied physical negative reinforement" and children. <grin!> Frank -- A closed mouth gathers no feet. -- Frank McKenney, McKenney Associates Richmond, Virginia / (804) 320-4887 Munged E-mail: frank uscore mckenney ayut mined spring dawt cahm (y'all)
From: Frnak McKenney on 17 Apr 2010 11:32 On Fri, 16 Apr 2010 11:15:56 -0700 (PDT), larwe <zwsdotcom(a)gmail.com> wrote: > On Apr 16, 1:48�pm, Tim Wescott <t...(a)seemywebsite.now> wrote: > >> > Or did I miss your point? Feedback... er, "comments" welcomed. >> >> OTOH, bonuses based on revenue, without looking at the long term effects >> of the sales methods used, can be very self defeating. > > There are two *very* simple rules here: > > 1) People tend to repeat behaviors for which they're rewarded. > > 2) Any rigid structure of rules encourages people to avoid the bars > and head for the loopholes, and the more complex the structure the > more loopholes exist. Then there's "predictability". Offer me a bonus but let me get the impression that the rules for obtaining it might or might not apply come bonus time -- or that the bonus fund might dry up -- and it loses a lot of its impact. And "consistency". If I think that the rules are vague and that a given bonus will be assigned based on favoritism or whim I may decide to adapt, or I may decide to ignore it. > In other words, for any nontrivial analysis, tell me your metric and > I'll make my numbers indicate I'm a golden god according to that > metric(*). Anyone who works at a BigCorp becomes very good at this (or > stays on the bottom rung, maybe on a PIP, for his whole life). We have (In his best Bill Cosby voice): Riiii-iight. _What_'s a PIP? > this discussion every year at performance evaluation time, when > clearly worthless employees are allowed to stay in the middle or upper > tier, while people who aren't favored (or aren't sufficiently > political players) are left on the bottom. > > (*) Six sigma helps ;) Hm. Are you saying that the incentive programs you've encountered fail massively to accomplish their stated goals, or that they have occasional misfires? (Or are you saying Something Completely Different? <grin!>) Incentive programs exist for the same reason bureaucracies come into existence: someone or some group comes to believe that a given behavior is Good or Bad, devises a rule or set of rules which will encourage or discourage (or mandate or prohibit) such behavior, and establishes a mechanism which will continue to apply such reinforcement in perpetuity (or until it gets changed). A CEO sees large numbers of manufacturing rejects and sets up a bonus plan to reward employees who have fewer of them; Congress sees problems in the nation's schools and we get a Department of Education and NCLB. Can you offer any suggestons on how to design a more effective incentive program for, say, Product Managers? (Yes, there's an implied <grin!> in there, but also a serious question.) Frank -- "The greatest obstacle to discovery is not ignorance but the illusion of knowledge." -- Daniel Boorstin -- Frank McKenney, McKenney Associates Richmond, Virginia / (804) 320-4887 Munged E-mail: frank uscore mckenney ayut mined spring dawt cahm (y'all)
From: larwe on 17 Apr 2010 13:10 On Apr 17, 11:32 am, Frnak McKenney <fr...(a)far.from.the.madding.crowd.com> wrote: > And "consistency". If I think that the rules are vague and that a > given bonus will be assigned based on favoritism or whim I may > decide to adapt, or I may decide to ignore it. That's potentially a bit backwards - look at classical operant conditioning research. Unpredictable rewards are actually better, because if you are 100% predictable, then the very first time you don't deliver (e.g. bad year's sales, etc) the conditioning takes a big hit. Better to reward randomly, so the rat keeps playing the slot machine even after it's been shocked, hoping that NEXT time will be the pellet. > > metric(*). Anyone who works at a BigCorp becomes very good at this (or > > stays on the bottom rung, maybe on a PIP, for his whole life). We have > > (In his best Bill Cosby voice): Riiii-iight. _What_'s a PIP? Personal Improvement Plan, i.e. death row. PIP is the term used by most BigCorps for what happens to you between "pissed your boss off one time too many" and "security is at your desk with a box". Some companies have a different term for it, but whatever the name, it's essentially supervised pre-firing probation. > Hm. Are you saying that the incentive programs you've encountered > fail massively to accomplish their stated goals, or that they have > occasional misfires? (Or are you saying Something Completely I'm saying that the organizational overcomplexity that leads to the formalization of such plans is a symptom that the structure is already so complicated that nobody's activities are directly linked (by a simple formula) to meaningful company goals, and so bonus levels (regardless of whatever rules are in place) are set mostly by how well the recipient can word his/her personal goal plan and how creative his/ her year-end wrap-up report can be. A few years at a BigCorp will make most people into accomplished weasels. The only programmed incentive plans that really make sense in an R&D type organization are project-linked and cross-functional. I.e. the company decides to develop Widget X. There's a schedule, and a budget. If Widget X gets released within x% of on time, within y% of budget, and it works well enough that there are fewer than z% of returns in the first quarter of sales, then the whole team assigned to that project (marketing, engineering, SWQA, HWQA, regulatory compliance, etc) should get a bonus. Note that the bonus becomes part of the budget for Widget X. The actual dollar amount to each person can be calculated using whatever weightings you'd like; number of hours spent on the project, current salary level, estimated market value of Widget X, first quarter's sales numbers for Widget X, ... For products that aren't under active development, no bonus is deserved because they're "just" being manufactured. If some unusual effort is taken by (say) a Product Manager to raise sales of a product, or Engineering does some unusual work to fix a production problem or value-engineer the design, there are ad-hoc incentive programs in place to reward that sort of thing. The actual bonus programs that are in place for Marketing and Sales in many (maybe not most) BigCorps are rewarding behaviors like "being a nice guy," "filling out one's paperwork neatly using the correct company font," and "twisting words like a greased weasel riding a motorized pipe snake". > existence: someone or some group comes to believe that a given > behavior is Good or Bad, devises a rule or set of rules which will The exact same sequence of events leads to stultification of an entire company by means of process. The process becomes the product, and any actual end-user product that accidentally escapes the process factory is an epiphenomenon. I am way too familiar with this end result...
From: Frnak McKenney on 19 Apr 2010 08:06
On Sat, 17 Apr 2010 10:10:50 -0700 (PDT), larwe <zwsdotcom(a)gmail.com> wrote: > On Apr 17, 11:32�am, Frnak McKenney ><fr...(a)far.from.the.madding.crowd.com> wrote: > >> And "consistency". If I think that the rules are vague and that a >> given bonus will be assigned based on favoritism or whim I may >> decide to adapt, or I may decide to ignore it. > > That's potentially a bit backwards - look at classical operant > conditioning research. Unpredictable rewards are actually better, > because if you are 100% predictable, then the very first time you > don't deliver (e.g. bad year's sales, etc) the conditioning takes a > big hit. Better to reward randomly, so the rat keeps playing the slot > machine even after it's been shocked, hoping that NEXT time will be > the pellet. Thanks for the reminder, though as I recall you do need a period of regular rewards befoe you start going random. In any case, I wonder if this applies to a human being making conscious decisions and with the full knowledge that the universe is imperfect, that other people make statements which may turn out to be inaccurate. I don't mean just lying, I mean people changing their minds or just being... wrong. For your example, for those employees who are strongly motivated by money (the ones we started off discussing), do you think that one bad year of sales and no bonus will significantly reduce the lure, the motivational force of next year's sales target? After all, one bad year _is_ sort of a randomization. <grin> Or, looking at it from a different angle, and for the employees I'm describing here, which do you think would have a stronger "deconditioning" effect: a year of bad sales (inconsistent environment), or a last-minute cap on the size of a bonus because the company didn't want one salesman "making too much money" (inconsistent policy)? >> (In his best Bill Cosby voice): Riiii-iight. _What_'s a PIP? > > Personal Improvement Plan, i.e. death row. PIP is the term used by > most BigCorps for what happens to you between "pissed your boss off > one time too many" and "security is at your desk with a box". Some > companies have a different term for it, but whatever the name, it's > essentially supervised pre-firing probation. Ah. Thanks. Where would we be without euphemisms? <grin!> >> Hm. Are you saying that the incentive programs you've encountered >> fail massively to accomplish their stated goals, or that they have >> occasional misfires? �(Or are you saying Something Completely > > I'm saying that the organizational overcomplexity that leads to the > formalization of such plans is a symptom that the structure is already > so complicated that nobody's activities are directly linked (by a > simple formula) to meaningful company goals, and so bonus levels > (regardless of whatever rules are in place) are set mostly by how well > the recipient can word his/her personal goal plan and how creative his/ > her year-end wrap-up report can be. A few years at a BigCorp will make > most people into accomplished weasels. Ah (again). It seems to be the range of the phrase "such plans" that I'm getting hung up on. My own experience is mostly limited to one small (under 100) company and consulting; while I've seen incentive plans with problems, I have to be cautious about extrapolating that limited experience out to cover all businesses. > The only programmed incentive plans that really make sense in an R&D > type organization are project-linked and cross-functional. I.e. the > company decides to develop Widget X. There's a schedule, and a budget. > If Widget X gets released within x% of on time, within y% of budget, > and it works well enough that there are fewer than z% of returns in > the first quarter of sales, then the whole team assigned to that > project (marketing, engineering, SWQA, HWQA, regulatory compliance, > etc) should get a bonus. Note that the bonus becomes part of the > budget for Widget X. The actual dollar amount to each person can be > calculated using whatever weightings you'd like; number of hours spent > on the project, current salary level, estimated market value of Widget > X, first quarter's sales numbers for Widget X, ... But isn't even this structure subject to your concern regarding "gaming the system"? Doesn't it offer a perverse incentive for a manager to (a) overestimate the budget, (b) pad the schedule, and (c) ensure that problems don't come to light for the first sales quarter? It gets tricky on the "upper management" side, too. If one forces a product manager to accept what that manager considers unrealistic goals, won't that be a disincentive for the entire team? (Which is an incentive for the team to back up their manager's extimates.) And then there's the confusion generated by Reality(tm) in the form of Murphy and the 90/90 rule of project management ("The first half of the project takes 90% of the project's resources; the second half takes the other 90%"). I can see that it's a messy situation, just as taxation-as-incentive can be messy when you have to use a surrogate (e.g. sales) instead of what you really want to measure (e.g. company gain). But does that imply that the task is impossible (no bonuses should be given out, or if given, they should be based on a manager's opinion)? Or just difficult and not likely to be solved in a one-size-fits-all fashion? > For products that aren't under active development, no bonus is > deserved because they're "just" being manufactured. If some unusual > effort is taken by (say) a Product Manager to raise sales of a > product, or Engineering does some unusual work to fix a production > problem or value-engineer the design, there are ad-hoc incentive > programs in place to reward that sort of thing. "Incentive programs" but not "bonuses"? That is, non-financial rewards? > The actual bonus programs that are in place for Marketing and Sales in > many (maybe not most) BigCorps are rewarding behaviors like "being a > nice guy," "filling out one's paperwork neatly using the correct > company font," and "twisting words like a greased weasel riding a > motorized pipe snake". D**n. I _knew_ that those silly Calculus and Physics clases were a waste of time; I should have been spending my time on Underwater Basket Weaving. <grin!> >> existence: �someone or some group comes to believe that a given >> behavior is Good or Bad, devises a rule or set of rules which will > > The exact same sequence of events leads to stultification of an entire > company by means of process. The process becomes the product, and any > actual end-user product that accidentally escapes the process factory > is an epiphenomenon. I am way too familiar with this end result... But do you see this as inevitable? Or do you think that the symptoms can be recognized before the "Medusa effect" becomes permanent, and perhaps the process slowed or even reversed? By the way: My nephew David at RPI mentioned Ricardo ("Maverick") Semler's book "The Seven-Day Weekend: Changing the Way Work Works" to me a few weeks back. I think David may have misinterpreted the title<grin>, but the book itself offers a radically different way of organizing a business that might appeal to you. Frank -- A very common attitude among scientists (and to be fair, most people) is that those who disagree with their judgments lack the knowledge to make the correct choice. -- Pete Shanks / Human Genetic Engineering -- Frank McKenney, McKenney Associates Richmond, Virginia / (804) 320-4887 Munged E-mail: frank uscore mckenney ayut mined spring dawt cahm (y'all) |