Wednesday, July 25, 2007

Bloomberg Recommends Education Pay Be Built on Ignorance

Studies of extrinsic rewards show a number of negative impacts. People lose interest in a normally enjoyable task when given performance awards. The surrounding system is suboptimized by those looking to optimize their individual rewards. A significant number of people lie, cheat or steal to reach the targets or be in the payout part of the distribution.

The 12 year run of executive incentive pay provides a clear example of such behavior as nearly 30% of publicly traded companies cheated by backdating stock options, frequently called the most "pure" form of incentive compensation. Yet, NY Mayor Michael Bloomberg and Democratic Presidential hopeful Barack Obama trumpet out the same motivation scheme for teachers, performance based merit pay.

Pay becomes a demotivator when insuffient. Human resource surveys show pay usually not in the top 5 or 6 motivators for working people. So why design a program around your 6th or 7th best motivator? And why use extrinsic motivators known to kill intrinsic motivation?

Recall the story of the Blind Men and the Elephant, each trying to describe their experience of an elephant based on their position? U.S. business and governmental leaders all stand at the tail worshipping the dung flung by the legions of executive pay consultants needed to tinker their never optimally working programs.

"If you want people to do a good job, give them a good job to do."-- Edwards Deming

"Pay people well, pay people fairly, and do what you can to put money out of their minds."--Alfie Kohn

Dr. Deming also said "We can do something about our problems, or we can continue the way we are." Back up the elephant, here comes another load...