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What is rewarded is not what is needed

If you see behaviour that doesn’t make sense, first have a look at what your organisation rewards and there’s a good chance you’ll soon understand why it’s occurring. The next step is to establish a reward system that encourages the behaviours you want to see more.

Steven Kerr wrote a brilliant article back in the 1980’s called On the Folly of Rewarding A and Hoping for B (reprinted in the Academy of Management Executive, 1995 Vol. 9 No. I). It highlighted that what is rewarded in an organisation is a strong driver of behaviour and the problems that can, and in most circumstances do, develop when what is rewarded (A) is not what is really wanted (B).

The other important point to note is that much can be learnt from the lessons and thinking that have stood the test of time rather than the new (or usually reconstituted or regurgitated) thinking that is captured within the leadershit industry. What Mintzberg called the significant old rather than the trivial new.

The basic point of the article is that the vast majority of people, adults and children as this logic is just as applicable for parents [see Reflections of a Single Dad], act rationally. We do what is rewarded in preference to what isn’t rewarded and this fundamental and obvious point is regularly missed.

Back a few years when I was an IT manager of an insurance company it was decided to provide a cash bonus for our sales force for each new client they brought on board. It was a decent incentive and it was “hoped” that it would bring in many new clients gaining valuable market share in a very competitive industry.

But. . .

What happened were two things. First, the sales reps went hell for leather in tracking down new leads and stopped servicing our existing clients. So while we added new clients, we lost existing ones. Second, the more creative minds worked out that if an existing client wanted to add a policy, with a subtle change of details, they could add them as a new client. The rep picked up the bonus but it was confusing for the client as they now received multiple communications and invoices rather than a consolidated account.

The point is that the sales reps had acted entirely rationally and maximised their bonus albeit that their behaviour was dodgy. I asked the sales manager if he was going to take any action and he said, “No, if we create dumb systems that’s our fault.” A very enlightened response.

If we think about organisations in general then there are several aspects that most organisation would want or would believe would benefit them. Unfortunately, as the following table demonstrates, what organisations reward is often the exact opposite.

What is wanted





Quality service


Staff retention & loyalty

What is rewarded

Cost shifting
Individual effort
Departments making budget

Business as usual
Existing targets
Anything but innovation

Hours worked
Commission sales

Shifting jobs to increase pay
Surviving restructures
Projects contracted out

Your staff aren’t stupid and they understand exactly what is going on inside your organisation. They know what they have to do to get ahead or simply survive. When it was discovered that health care workers were visiting the same patients up to three times a day, it made entire sense when they were working to targets under the threat of a review (see lesson xx: A review is still a restructure and a sign of failed management).

You pick any words you like for your values (see Valueless values) but if you are running a bureaucratic, siloed, dog-eat-dog, steady as she goes operation you’ll have process driven, departmental focussed, individualistic and uninspired staff.

Success will occur in spite of your management.

Roger McEwanComment