Case Study – Sins of Commission

8 Mar

Jeffrey Pfeffer is right about the essential issue with performance-based incentive programs: “Most companies have production processes and objectives that are way too complicated to be adequately captured in any incentive scheme.” As Pfeffer points out, the answer to complicated production processes is to make performance measurement more complicated. However, the more complex it gets, the less likelihood it has of guiding behavior.

I used to receive an incentive payout based in part on the overall patient satisfaction score for a 528-bed acute-care hospital. For a hospital with more than 20,000 annual admissions, there are literally millions of individual interactions and transactions between patients and employees that would eventually comprise the score, including how the survey itself was conducted and the response rate. Patient satisfaction scores are based on a huge range of variables, everything from how the patient was greeted at the front desk to whether the food was hot on Tuesday. Weeks after the fact, the patient will get a bill, which will also affect how he or she perceives the experience. And of course, even the physician can’t guarantee the patient will get the cure he or she seeks.

While it’s great in concept to make us “severally liable” as a team, from a practical standpoint no one individual has a significant effect on this score. Employees are not guided in their moment-by-moment choices by what’s going to be on their annual review. They’re guided by what they’ve been trained to do, what their culture expects them to do, what their peers do, guidance from their supervisor and their own judgment and experience.

Am I saying this measure, patient satisfaction, isn’t important? Of course not – it’s crucial. But what really guides our behavior as employees? Broader internal forces, such as organizational culture and behavioral modeling by superiors and peers, are more likely to have impact on the day-to-day actions of employees than a once-a-year measurement process.

So why is it there? It’s the path of least resistance. It’s easier for leaders to spend one week or so tweaking the performance measure process for the year than it is work daily to change organizational culture, to really look at how to improve the work environment and communication. Managing requires developing a clear vision and goals, communicating that vision to employees, and repeating those goals over and over again. The ideal is for employees to have such clarity of mission and purpose that it guides them almost intuitively to make decisions and take actions which lead directly to achieving the business goals. They know the patient wants to be greeted warmly at the front desk, receive hot food and an easy-to-understand invoice, and they act accordingly.

“Sins of Commission: Be Careful What You Pay For, You May Get It” is excerpted from Stanford Management Professor Jeffrey Pfeffer’s book What Were They Thinking? Unconventional Wisdom about Management.


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