Joke: A poor Jew lived in the shtetl in 19th
century Russia. A Cossack comes up to him on horseback.
“What are you feeding that chicken?” asks the Cossack.
“Just some bread crumbs,” replies the Jew.
“How dare you feed a fine Russian chicken such lowly food!” says the
Cossack, and hits the Jew with a stick.
The next day the Cossack comes back. “Now what are you feeding that
chicken?” ask the Jew.
“Well, I give him three courses. There’s freshly cut grass, fine sturgeon
caviar, and a small bowl of heavy cream sprinkled with imported French chocolate truffles for dessert.”
“Idiot!” says the Cossack, beating the Jew with a stick. “How dare you waste
good food on a lowly chicken!”
On the third day, the Cossack again asks, “What are you feeding that
chicken?”
“Nothing!” pleads the Jew. “I give him a kopeck and he buys whatever he
wants.”
(pause for laughter)
(no?)
(ba dum dum)
(still no laughter)
(oh well).
I use the term “Econ 101”
a little bit tongue-in-cheek. For my non-American readers: most US college
departments have a course numbered “101” which is the basic introductory course for
any field. Econ 101 management is the style used by people who know just enough
economic theory to be dangerous.
The Econ 101 manager assumes that everyone is motivated by money, and that
the best way to get people to do what you want them to do is to give them
financial rewards and punishments to create incentives.
For example, AOL might pay their call-center people for every customer they
persuade not to cancel their subscription.
A software company might give bonuses to programmers who create the fewest
bugs.
It works about as well as giving your chickens money to buy their own food.
One big problem is that it replaces intrinsic motivation with extrinsic
motivation.
Intrinsic motivation is your own, natural desire to do things well. People
usually start out with a lot of intrinsic motivation. They want to do a good
job. They want to help people understand that it’s in their best
interest to keep paying AOL $24 a month. They want to write less-buggy
code.
Extrinsic motivation is a motivation that comes from outside, like when
you’re paid to achieve something specific.
Intrinsic motivation is much stronger than extrinsic motivation. People work
much harder at things that they actually want to do. That’s not
very controversial.
But when you offer people money to do things that they wanted to do, anyway,
they suffer from something called the Overjustification
Effect. “I must be writing bug-free code because I like the money I get for
it,” they think, and the extrinsic motivation displaces the intrinsic
motivation. Since extrinsic motivation is a much weaker effect, the net result
is that you’ve actually reduced their desire to do a good job. When you
stop paying the bonus, or when they decide they don’t care that much about the
money, they no longer think that they care about bug free code.
Another big problem with Econ 101 management is the tendency for people to
find local maxima. They’ll find some way to optimize for the specific thing
you’re paying them, without actually achieving the thing you really want.
So for example your customer retention specialist, in his desire to earn the
bonus associated with maintaining a customer, will drive the customer so crazy
that the New York Times will run a big front page story about how nasty your
customer “service” is. Although his behavior maximizes the thing you’re paying
him for (customer retention) it doesn’t maximize the thing you really care
about (profit). And then you try to reward him for the company profit, say, by
giving him 13 shares of stock, and you realize that it’s not really something
he controls, so it’s a waste of time.
When you use Econ 101 management, you’re encouraging developers to game the
system.
Suppose you decide to pay a bonus to the developer with the fewest bugs. Now
every time a tester tries to report a bug, it becomes a big argument, and
usually the developer convinces the tester that it’s not really a bug. Or the
tester agrees to report the bug “informally” to the developer before writing it
up in the bug tracking system. And now nobody uses the bug tracking system. The
bug count goes way down, but the number of bugs stays the same.
Developers are clever this way. Whatever you try to measure, they’ll find a
way to maximize, and you’ll never quite get what you want.
Robert Austin, in his book Measuring and Managing Performance in
Organizations, says there are two phases when you introduce new performance
metrics. At first, you actually get what you wanted, because nobody has figured
out how to cheat. In the second phase, you actually get something worse,
as everyone figures out the trick to maximizing the thing that you’re
measuring, even at the cost of ruining the company.
Worse, Econ 101 managers think that they can somehow avoid this situation
just by tweaking the metrics. Dr. Austin’s conclusion is that you just can’t.
It never works. No matter how much you try to adjust the metrics to reflect
what you think you want, it always backfires.
The biggest problem with Econ 101 management, though, is that it’s not
management at all: it’s really more of an abdication of management. A
deliberate refusal to figure out how things can be made better. It’s a sign
that management simply doesn’t know how to teach people to do better work, so
they force everybody in the system to come up with their own way of doing it.
Instead of training developers on techniques of writing reliable code, you
just absolve yourself of responsibility by paying them if they do. Now every
developer has to figure it out on their own.
For more mundane tasks, working the counter at Starbucks or answering phone
calls at AOL, it’s pretty unlikely that the average worker will figure out a
better way of doing things on their own. You can go into any coffee shop in the
country and order a short soy caramel latte extra-hot, and you’ll find that you
have to keep repeating your order again and again: once to the coffee maker,
again to the coffee maker when they forgot what you said, and finally to the
cashier so they can figure out what to charge you. That’s the result of nobody
telling the workers a better way. Nobody figures it out, except Starbucks,
where the standard training involves a complete system of naming, writing
things on cups, and calling out orders which insures that customers only have
to specify their drink orders once. The system, invented by Starbucks HQ, works
great, but workers at the other chains never, ever come up with it on their
own.
Your customer service people spend most of the day talking to customers.
They don’t have the time, the inclination, or the training to figure out better
ways to do things. Nobody in the customer retention crew is going to be able to
keep statistics and measure which customer retention techniques work best while
pissing off the fewest bloggers. They just don’t care enough, they’re not smart
enough, they don’t have enough information, and they are too busy with their
real job.
As a manager it’s your job to figure out a system. That’s Why You Get The
Big Bucks.
If you read a little bit too much Ayn Rand as a
kid, or if you took one semester of Economics, before they explained that
utility is not measured in dollars, you may think that setting up simplified
bonus schemes and Pay For Performance is a pretty neat way to manage. But it
doesn’t work. Start doing your job managing and stop feeding your chickens
kopecks.
“Joel!” you yell. “Yesterday you told us that the developers should make all
the decisions. Today you’re telling us that the managers should make all the
decisions. What’s up with that?”
Mmm, not exactly. Yesterday I told you that your developers, the
leaves in the tree, have
the most information; micromanagement or Command and Control barking out orders
is likely to cause non-optimal results. Today I’m telling you that when you’re
creating a system, you can’t abdicate your responsibility to train your people
by bribing them. Management, in general, needs to set up the system so that
people can get things done, it needs to avoid displacing intrinsic motivation
with extrinsic motivation, and it won’t get very far using fear and barking out
specific orders.
Now that I’ve shot down Command and Control management and Econ 101
management, there’s one more method managers can use to get people moving in
the right direction. I call it the Identity method and I’ll talk about it more
tomorrow.
http://www.joelonsoftware.com/items/2006/08/09.html
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