Don't work against each other

Last week I explained what's wrong with using quantitative targets to measure your employees. There's one other risk you might run, but I didn't discuss it there because (unlike the others) it doesn't really derive from a flaw in applying the metrics themselves.

Say you offer a bonus to the highest achiever in a certain area—the one who packages and ships the most widgets, or something. This is probably a number that is easy to calculate; and if you are in the business of packing or shipping widgets, there's no obvious hidden bias. The problem, rather, is that you risk setting your people at odds with each other, because they will compete internally to get whatever reward you offer to The Winner. 

We are so used to thinking of competition as a spur to great achievement, that it's easy to forget how it can also shred your organization's ésprit de corps. If Fred and Max are both likely contenders for the prize, they might both lose sight of the bigger picture in the rush to win. In the extreme case, if it looks like Fred is going to pack more than Max, Max might sabotage Fred's work so that he falls behind. In a sense this is just an instance of "unhelpful optimization," which we have discussed before. What makes it especially poisonous is that the members of an organization have to be able to rely on each other or the organization falls apart. This is not just a mathematical misunderstanding which drives suboptimal behavior. This can strike at the heart of the organization itself.*

Of course your mileage may vary. If wages are generally fair, and if the prize is mostly symbolic—a stuffed plush toy, say, or a loaf of zucchini bread—then people will likely treat the competition with a sense of fun. Last year Fred won, this year Max won, next year maybe it will be Ermentrude, but in any event the whole team can go out for pizza afterwards with a good heart. But if your people do not feel that wages are fair, and if the prize is really substantial, then the effects are going to be corrosive.

You already have to compete against other firms in the marketplace. At least inside your own walls, your people should feel safe.

This clip from the movie "A Beautiful Mind" sums up the issue elegantly.**

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* To be clear, this is hardly a revolutionary insight. The earliest thinkers to address social organization were already aware of it. See, in particular, Plato's discussion of exactly this topic in Laws, near the beginning of Book 1, Stephanus pages 625D-628E.

** Comments on YouTube seem divided over whether this clip correctly explains the concept of Nash equilibrium. I'm not an economist, so I have no idea whether it does. But it is a great scene.