When Incentives Blow Up

By Lloyd Graff

Texas City Explosion 2005

As the details gradually emerge from the BP oil spill it becomes more and more clear that management in London had incentivized the troops in the field to skimp on maintenance to enhance the company’s bottom line. There probably is a connection between the BP refinery explosion at Texas City back in 2005 and the Deepwater catastrophe in the Gulf. It appears to me that London had incentivized its employees to emphasize the short-term bottom line and ignore the future consequences.

With the U.S. productivity statistics showing incredible improvement in efficiency month after month, it prompts the question whether productivity incentives are always good long-term.

In the machining game, there is a danger in setting productivity targets that invite people to game the system. If one machine operator or shift is competing with another the temptation for sabotage in the plant is real. When teams compete against norms and other teams, the peer pressure within teams can become destructive to the enterprise. In a coal mine, when tonnage means everything, safety is often neglected, which may culminate in tragedy.

Sales incentives which are based on monthly or quarterly results often end up with employees gaming the system.

I’m interested in your experience with incentives.

How do you make incentives work for the business rather than undermine it?

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4 thoughts on “When Incentives Blow Up

  1. AvatarPeter Langton

    The problem, in my opinion, is we think that money motivates. Money is only a short term motivator. Generally employees are motivated by much greater causes, like feeling valued, contributing to the sucess of an organization, or being recognized for their input. We place way too much on incentive plans. Bottom line, pay people right, don’t hold back and don’t be skimpy. Take compensation off the table by paying people right and then engage individuals and groups in improving for the sake of improvement. In and out of work we all participate in games and competition. The sense of winning is more motivating than pay.

    Any focus on incentive and the development of a long term sucess needs to focus on sustaining momentum,not on continually trying to bribe employees toward specific actions. The results can be fatal…but more likely, just won’t drive long term sucess.

     
  2. AvatarElizabeth Barr

    It’s easy to see why such a huge company like BP has massive problems. When you have layers upon layers of people, the “real” problems gets buried. Monetary incentives can make matters worse, but mostly if there is no enforcement of corrective action at all levels. The employee’s attitude shifts from caring about producing a good product to the acceptable thinking that “it’s ok as long as we don’t get caught, and even if we do get caught, there won’t be a price to pay”. No one is really responsible. You can see this clearly in BP’s attempt to place blame everywhere but within the organization. Sure, today they fire their CEO, but the biggest question is …. why didn’t they have a corrective action containment procedure in place immediately given the horrific nature of the accident?

    Money or not, you have to run a company, large or small, with a solid quality management system. Believe me, it gets rid of all the weeds and dead wood.

     
  3. LloydLloyd

    Life is strange. After I wrote this blog I learned that the Townsend Company of Altoona Iowa is being auctioned off. I had written a Swarf for Screw Machine World back in the day, about the unusual incentive this maker of printing presses and accessories offered to workers if they hit monthly shipment targets . If they beat the target each worker would be given a $100 credit at a local supermarket. This was especually valued by women and spouses who pressured their husbands at the end of each month to work hard and bring home the bacon, literally.

    Townsend was a good company and there was a lot of team spirit. I understand the owner died and the market for printing equipment is currently weakj. Ironic to find out about Townsend yesterday.

     
  4. AvatarPatricia

    Peter,
    Your input is very interesting – unfortunately – looking around even at my coworkers – I have to say that is not going to work for everyone. I really can’t believe that everyone is that self-motivated – as much as I’d like to believe otherwise. Now, when you are dealing with quality people I’m sure that IS the best way to do things. Not because monetary incentives don’t work… but because when you are looking out for their back – your employees (assuming you keep the right people around) will look out for yours. And believe me they will see a lot more than you can.
    Monetary incentives focus on a specific topic. You get this IF you do this. Which I see as a HUGE parallel to lawmaking nowadays. The problem with this is… your company’s main goal is not actually the piddley little thing that employees are getting money for but what you think that does to your overall goals. Generally when YOU put the focus on the little things both you and the employees forget about the whole. For your employee, it becomes inconsequential to think of what is best for the company and when you’re wasting all your time checking up on their little progresses… you may forget about it to.
    I think incentives are great. I know some businesses that do peer reviews that can earn their employees gift certificates or bonuses. Some businesses pay their employees well but make a point to ensure that only so much of their time is on overhead – as opposed to being billable to a specific job.
    The main problem I see in businesses and our government – is poor management. Those above don’t see the value in seeking out the input of those below. But as one of those below – in both categories – what can you do about it?
    Patricia

     

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