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Monday, July 16, 2007

Rewards Systems

One of the things that HR is responsible for is implementing rewards systems. We want to reward good behavior and extinguish bad behavior. We implement Balanced Scorecards and pay for performance. We encourage managers to set goals for their employees and then rate them accordingly.

But, what if, rather inadvertently, our rewards system punishes the wrong employees?
California health authorities on Thursday released a study showing for the first time how many heart bypass patients die after surgery, the names of their surgeons and the hospitals where the operations were performed.

Excellent? Right. See the next paragraph:
Surprisingly, the state-mandated survey gave the worst ratings to some hospitals that have been regarded as among the best in the business.

UCSF Medical Center, one of the premier teaching hospitals in the nation, was one of only six hospitals out of 121 in the state awarded a black eye in the survey -- rated "worse" than average in a statistically complicated analysis that counted deaths but gave credit to doctors and hospitals that treat sicker patients.

Most of us HR types don't work in health care, but this can happen in all industries. How many times have you seen someone put on a "special project" and said, "boy, that is going down in flames and taking the poor sucker with it."

I know I've seen it. Many projects that are complex have a high potential for abysmal failure, but if successful can turn a company around. When employees are assigned to a project, we know that they will probably fail, but they might succeed. Our traditional rewards structure would demand that "failure" of the project result in bad things happening to the employees.

As a result of this, people with good potential, great ideas and technical know-how steer clear of such projects. Why take something on that could ultimately end up with being shown the door? The people willing to take it on are those who have nothing to lose. As a result, we end up with failures where we could have had success. And the up and coming stars miss the opportunity to learn the lessons they could learn from such a project.

Make sure you don't structure things such that employees avoid the most difficult work.

(Hat tip: Kevin, MD.


Anonymous said...

I've seen this kind of thing first-hand. Many years ago, I was a technical team leader for a software company. This means that I was responsible for handing out work tasks like fixing bugs, but didn't have direct managerial responsibilities like giving reviews. I'd provide my input to the manager at review time.

On my team I had one very good worker and several mediocre ones. So, in order to get through our workload of bugs, I assigned the more difficult ones to the better worker. Even with superior skill, the harder bugs take longer to fix. Come review time, he gets marked down because he is "not as productive" as the others. This despite my careful explanation of why he fixed fewer bugs. In order to protect this one, very good, worker's standing, I had to hurt the company by giving him easy bugs to fix and giving hard ones to people who weren't up to the task -- the overall result was a loss of productivity for the team.

I could write an entire book about the management mistakes that one company made.

Evil HR Lady said...

Excellent example.

Or terrible example.

Things like that bug me.

Anonymous said...

A bit say how much I love this blog! I don't know a thing about HR and as a Canadian it sounds like your stuff wouldn't apply to me anyway (plus I'm a student and not working...) - but I check in daily to see what's up.

I can't put my finger on what it is that is so interesting about HR issues - it is a bit like peeking around a door at what The Adults are talking about. But in any case I did want to say keep it up. I'm a fan. :)

Anonymous said...

On topic - you see this in medicine, of course, as you referred to. The top specialists tackle the hardest cases, the ones with most potential complications and greatest risks for poor outcomes. The outcomes themselves do not in any way reflect the skill or quality of the doctor in question - at least not in the way that management seems to be taking it.

What a stupid, wasteful system it can be! Very frustrating for staff and managers alike, I would imagine.

Evil HR Lady said...

Aww, thanks blogosaurus. The reason you find HR stuff so interesting is that there's always a train wreck either ongoing or waiting to happen.

Keep up your schooling and you two can join the dark side!