In the latest HCI Webinar, Dr. Jonathan H. Westover talks with Tom Geraghty about goals and incentives - from the cobra effect and perverse incentives. Below is a summary of the main points from their conversation! Check out the full episode and let us know what you think!
Watch the episode here:
Quick Recap
Jonathan and Tom discussed the concept of perverse incentives and their impact on motivation and performance in the workplace, emphasizing the importance of trust and psychological safety for fostering innovation and high-performing teams. They also explored the challenges of measuring and incentivizing certain behaviors, the need for aligning company values with performance metrics and incentives, and the potential for deviant behaviors in organizations due to misaligned incentives and a high-pressure culture. The conversation concluded with the importance of regularly revisiting metrics and incentives to ensure alignment with desired outcomes.
Perverse Incentives, Motivation, and Psychological Safety
Jonathan and Tom discussed the concept of perverse incentives and their impact on motivation and performance in the workplace. Tom, an experimentalist turned CEO and founder of Psychological Safety, shared his background and passion for creating conditions for teams to thrive. They agreed that trust and psychological safety are essential for fostering innovation and high-performing teams. Tom emphasized that psychological safety is crucial not only for innovative roles but also for roles requiring compliance and safety. The conversation laid the foundation for further exploration of these topics in future discussions.
Addressing Perverse Incentives and Trust in Teams
Jonathan and Tom discussed the importance of psychological safety and trust in teams, highlighting the role of perverse incentives in damaging these aspects. They mentioned the cobra effect and the challenges it presents, particularly in sales teams where individual targets and incentives can lead to unhealthy competition and mistrust. They also touched on Goodhart's Law, which states that when a measure becomes a target, it ceases to be a good measure, and Campbell's Law, which suggests that the higher the reward, the more likely a metric is to be distorted. The conversation concluded with the idea that measuring psychological safety can sometimes reveal undesirable results, but it is crucial to address these issues to improve team dynamics.
Addressing Unintended Consequences of Metrics
Tom and Jonathan discussed the challenges of measuring and incentivizing certain behaviors. They agreed that while the intention is to encourage positive actions, the actual outcome can often be counterproductive. Jonathan suggested that continually revisiting and refining metrics could help mitigate unintended consequences. Tom provided an example from the safety industry, where a metric meant to encourage safety reporting inadvertently discouraged reporting of minor incidents. They concluded that reframing metrics to align with the desired outcomes could be a solution.
Aligning Company Values With Performance Metrics
Tom and Jonathan discussed the challenges of aligning company values with performance metrics and incentives. They agreed that while it's essential to measure and incentivize certain behaviors, over time, these incentives can lead to unintended consequences and diverge from the company's values. Jonathan suggested that leaders should strive to influence behavior and drive business success while minimizing the negative effects of these metrics. They also touched on a case study involving a bank that incentivized fraudulent bank account applications, highlighting the need for careful consideration when setting performance metrics.
Addressing Deviant Behaviors in Organizations
Jonathan and Tom discussed the potential for deviant behaviors in organizations due to misaligned incentives, lack of checks and balances, and a high-pressure culture. They highlighted the normalization of deviance, where unethical practices become accepted over time. Jonathan emphasized the importance of regularly revisiting metrics and incentives to ensure alignment with desired outcomes. Tom stressed the value of qualitative measures in understanding an organization's true state beyond quantitative metrics alone.
Listen to the webinar here:
