It was late on a Friday when the route manager gathered his team of sanitation collectors together for an announcement. The mystery of such summoning fills the air with caution, concern, and whispers of layoffs. After a brief greeting and poorly executed pun, the route manager commenced announcing the organization’s latest incentive plan.
The route manager stated that the company had accessorized each trash truck with a GPS device that collects various information about their vehicle’s operation and the route. There were many benefits described, which allowed the organization to identify problems and respond proactively. The advantage that piqued the team’s interest the most was a bonus to those who complete all of their stops most efficiently.
The managers who had pulled together the incentive plan and bonus structure were targeting two goals. The first was to tighten up the arrival time of the trash trucks to the headquarters. Many days, the arrivals varied in several hours, requiring the cleanup crew to stay late, which made the cost of overtime challenging to plan. The second goal was to generate a spirit of competition between the teams to elevate their performance and create a self-governing driver for efficiency.
The results were immediate. The period between the arrival of the last truck was within an hour of the first truck. It was a 20% improvement over the prior week, saving the organization around $5,000 in overtime. The managers were thrilled and celebrated with a team high-five in the conference room. Over the following weeks, the trend continued to point to the incentive plan’s effectiveness and the success of the program.
However, while the managers were celebrating their brilliance, the residents upon their routes began calling in to complain about the trash that fell from the trucks, polluting their streets with crushed pizza boxes and unsanitary household rubbish. When the word came to the managers, the unanticipated effect of their brilliant plan dashed their collective high.
It was evident that their incentive plan was very effective in getting what they wanted – and only what they wanted. Rewarding efficiency without a complimentary quality measure resulted in cut corners and reduced customer satisfaction. It is Goodheart’s Law in full effect.
When designing performance metrics and incentive plans, it is essential to consider what falls away when a single drive, such as efficiency, is emphasized. Imagine what the results would have been if John F. Kennedy had announced that “… before this decade is out, we will land a man on the Moon.” absent of the cavitate of “…and returning him safely to the Earth.” We’d like to believe that the latter should be assumed; however, without that condition of quality defined in the goal, the results of that historic challenge would likely have been much different.