Tuesday, June 24, 2008

Analogy #186: Fat Cats

I have a cat which is terribly overweight. We try to get her to exercise, but she’d much rather just eat and sleep.

One thing the cat will do is go outside and walk around a bit. To encourage her to go outside more, we decided to reward that effort. Since her favorite reward is food, we would give her food as a reward after having spent time outside.

We wanted her to associate getting food with going out—to encourage her to go out and exercise more. Instead, she associated getting food with coming back in. So she started coming in more. Rather than spending a lot of time outside exercising, she would go out for only a few minutes and then come back in—expecting to get some food.

The cat would try to keep this routine up for awhile—go out for a couple of minutes, come back in for some food, immediately go back out for a couple of minutes, get more food, and so on. As a result of this routine, she was actually gaining weight rather than losing weight.

Obviously, this reward system had some flaws in it.

We wanted to get the cat to exercise, but since she didn’t want to, we gave in to her food cravings to try to entice the right behavior. We did not end up getting the right behavior, because she found a loophole to fulfill her cravings without performing the right behavior. All we ended up with was a fat cat.

There are many “fat cats” in the business world as well. These are people who find a way to get excessively rich at the expense of the company without giving back much in return. We entice these people to come and stay with lots of money, because that’s what supposedly motivates them. In return, we expect to get some great productivity out of them.

However, just like my cat, they find a way to get what they want without helping to get what I want. In the end, they remain “fat cats” and I look like a big fat loser.

The principle here is about getting the right linkage between motivators and desired outcomes. The closer the linkage, the higher the likelihood of success. In the case of my cat, the linkage was weak. I wanted to motivate exercise, but I did not choose a motivator directly related to exercise. I did not make exercise more exciting. I did not reduce the barriers to exercise to make it easier. I did not enhance her self-esteem through exercise.

Instead, I did the opposite. I rewarded her for stopping the exercise and coming back inside. I wanted her to become healthier, but the reward made her less healthy.

I was looking for a distant connection, where even though I did not really make exercise more appealing, I created a reward that loosely was connected to the exercise. It was so loose that she found a way to disconnect the reward from the task and get the food without the exercise.

In the business world, monetary rewards can often be just as ineffective. They are only loosely and indirectly tied to business behavior. For generations, study after study has shown that money is, at best a short-term motivator. After that, it doesn’t work well. People find loopholes to get the money without doing the desired work. Things like back-dating options or padding the budget get more attention than doing the work.

Enron failed because it relied too much on obscenely high monetary rewards to motivate behavior. To get their hands on all that money, the employees started bending the work rules. Rather than earning the money through hard work, attention moved to earning it through questionable business practices.

Shortly before the Enron meltdown, I spoke with one of their top executives about this issue. I was concerned that extremely high goals tied to extremely high monetary rewards could create people issues. He said that this practice tended to lure employees from investment banking who were used to this type of environment, so it worked fine with them. You get the type of people who are most in tune with your rewards. Enron wasn’t luring energy experts who loved the business. They were luring people who would stop at nothing to get their hands on big piles of cash.

According to Anders Dahlvig, CEO of IKEA, “Paying the highest as a strategy is a dangerous path to go on, as you only get people who are motivated by money, and they will leave when they get a better offer.” Instead, Dahlvig wants to find people who are motivated by more work-related items, so he tries to be the best at things like recognition, development and work conditions.

Marcus Buckingham at Gallop has done a lot of research into this area and agrees that they more you reward with items that are closely linked to the actual activity of work, the better off you are. Buckingham has boiled it down to 12 questions:

1. Do I know what is expected of me at work?
2. Do I have the materials and equipment that I need in order to do my work right?
3. At work, do I have the opportunity to do what I do best every day?
4. In the past seven days, have I received recognition or praise for doing good work?
5. Does my supervisor, or someone at work, seem to care about me as a person?
6. Is there someone at work who encourages my development?
7. At work, do my opinions seem to count?
8. Does the mission or purpose of my company make me feel that my job is important?
9. Are my coworkers committed to doing quality work?
10. Do I have a best friend at work?
11. In the past six months, has someone at work talked to me about my progress?
12. This past year, have I had opportunities at work to learn and grow?

If you focus on this more than the monetary rewards, you will get highly motivated employees who will give you their best. It lures the people who want a place where working well is highly valued. These are the people you want.

This is the driving force in the culture at Google. They wanted to build an environment where hard, dedicated workers want to be. They filled the campus with all sorts of perks (like food and entertainment), so that you’d want to stick around the office. They created a highly collaborative environment, where people could bond, making it even more desirable to stick around. They give freedom to pursue one’s own projects, one of the greatest motivators to the truly creative. Successful project completion is highly valued and recognized.

By using the motivators which are most tightly linked to the desired behavior, Google has a long waiting list of great people who are begging to work there.

I’ve been at places where the culture has shifted away from this to more of a money-based reward culture. The pattern is always the same. First, many of the best, most creative people leave. Of the ones who stay, they tend to be less emotionally tied to the company, so they don’t work as long or as hard. People who love the business are replaced by people who love the money. Teamwork is replaced by selfish greed. Performance suffers.

Passion is a wonderful thing. I’d take a roomful of people passionate about the business over those who are only there for a paycheck any day. Therefore, create motivations which appeal to passionate people.

Just as it’s hard to get a cat to lose weight when you bribe them with food, it’s hard to get a good work ethic when you bribe employees with non-work rewards like money. Money makes people want to leave work and enjoy spending the money. It makes people think of early retirement. And over time, it doesn’t make folks want to be better, more loyal employees.

Executives frequently say that their most important asset is their people. Yet, when it comes time to develop strategies, people concerns are often just an afterthought, if mentioned at all. A key part of any good strategy should be making sure that you have the right people, properly motivated. Proper motivations try to get as tightly linked to the day to day work life as possible. This tends to have much greater success than mere cold cash.

One time, I was working at a company which had just released its proxy statement. Employees started reading the document to see how much money all the top executives where making (which, by the way, was quite a bit more than what those reading the proxy were making). Employees started complaining about the seeming pay “injustice.”

Finally, someone said that the reason the top executives make so much is because it takes that kind of money to lure that level of talent. Not being particularly impressed with these leaders, my response was, “You mean to say that if I paid less money, I could get a better level of talent?”

Sometimes, less money can actually improve the talent, provided you substitute it with something more closely linked to motivating talented leaders.

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