Then, the following happened:
Posted: Thu Feb 06, 2025 9:25 am
Paul achieved a simple goal of 110%, which he managed to lower after several rounds of negotiations with his manager;
➔ Mary achieved 80% of her ambition, far exceeding what anyone in the company had imagined.
Who deserved the bigger bonus? Mary, of course. But who got the bigger bonus in the end? Paul.
This story is a classic example of perverse incentives. For all practical purposes, our incentive system rewards improper behavior.
We are all Paul and Mary
There's a little Paul and Mary inside everyone. Your incentive system should work for real people in real life. Even if you had a team full of Marys, why would you have a system to incentivize something you don't want to happen?
If you want to create a culture where setting stretch goals morocco mobile database is the norm, you should consider moving away from formula-based or tightly coupled models for bonuses and promotions.
What are the alternatives?
One approach is to adopt a system where the achievement of goals is fed into the performance review process, where bonuses and promotions are defined. In this model, pay and goals are loosely coupled.
Performance evaluations consider not only the percentage of goals achieved, but also the goals themselves: difficulty and impact on the business. Think of it like difficulty scores in gymnastics: you get more points by performing more difficult routines.
Subjective thinking
A common complaint about this model is that it is "subjective," whereas formula-based models are "objective.
➔ Mary achieved 80% of her ambition, far exceeding what anyone in the company had imagined.
Who deserved the bigger bonus? Mary, of course. But who got the bigger bonus in the end? Paul.
This story is a classic example of perverse incentives. For all practical purposes, our incentive system rewards improper behavior.
We are all Paul and Mary
There's a little Paul and Mary inside everyone. Your incentive system should work for real people in real life. Even if you had a team full of Marys, why would you have a system to incentivize something you don't want to happen?
If you want to create a culture where setting stretch goals morocco mobile database is the norm, you should consider moving away from formula-based or tightly coupled models for bonuses and promotions.
What are the alternatives?
One approach is to adopt a system where the achievement of goals is fed into the performance review process, where bonuses and promotions are defined. In this model, pay and goals are loosely coupled.
Performance evaluations consider not only the percentage of goals achieved, but also the goals themselves: difficulty and impact on the business. Think of it like difficulty scores in gymnastics: you get more points by performing more difficult routines.
Subjective thinking
A common complaint about this model is that it is "subjective," whereas formula-based models are "objective.