Reading blogs can become a major distraction, but can also be a good source of information and ideas. Like this piece I saw tucked away in a response to a post on Diane Ravitch’s Blog on how the implementation of a new and different bonus system at Hewlett-Packard in the early 1990′s went awry. Seems that a program for increasing worker productivity and enhancing team performance, versus individual performance, by designing a plan that tied 10 to 20 percent of workers’ pay to each team’s performance did not have quite the desired effects.
Read for yourself how it all panned out. The piece, by Kevin Gray, is called How NOT to Do Incentive Pay and comes from CBS Money Watch site. Looks fairly instructive to any organization that may be thinking that $$$ makes the world go around.
Here’s part of the HP story; the highlighting through bolding is mine. Important lessons to be learned; take-aways in today’s edreform vernacular.
“The experience of Hewlett’s San Diego production unit was typical. Management set a series of production goals — parts or units moved per hour, per day, for instance — for several teams, and based their workers’ pay on three levels of rewards. They figured that most of the teams, 90 percent, could reach Level 1. Of that, maybe 50 percent would reach Level 2. And it was likely that only 10 to 15 percent could reach Level 3, the highest and most productive. Achieving Level 3 status meant each worker on the team would receive a bonus from $150 to $200 for that month.
They were wrong. For the first six months, nearly every team hit the two highest levels. Good for employees, who were suddenly — if briefly — flush, but bad for the bottom line. Management found itself paying out more than it had expected, so it adjusted the target numbers upwards, essentially moving the goal posts during the game.
A bad mood began to set in. [I will bet that it did!!]
The slow delivery of parts from other units affected their work and frustrated the teams. High-performing teams refused to allow workers they saw as less experienced join them. Less movement between teams meant that less knowledge was shared or transferred among employees. Workers who bought cars and new homes had trouble paying loans when they could not achieve their numbers. The whole experiment grew increasingly messy, and workers became irritated.”
Hmmm,… Unintended consequences and unexpected results–to be sure. But, that’s the way things go when one is dealing with people and not widgets. The phrase “so it adjusted the target numbers upwards, essentially moving the goal posts during the game” certainly got my attention. Reminded me of the ever upward re-establishment of targets for reading and math scores for achieving AYP under No Child Left Behind. The kids couldn’t meet last year’s target of 729, so they moved it up to 755 for this year, and reset it yet again for 783 for next year. WTH? Does this make sense to anyone?
Anyway, let’s see what the outcomes will be with the DEDOE plan to incentivize highly effective teachers to stay in their struggling schools or for other highly effective teachers to transfer to a much more challenged and challenging school. Stay tuned.