Last Updated Mar 29, 2009 8:01 PM EDT
Anyway, I then discovered the Professor Pfeffer writes a monthly blog for BNET and in a recent post asked this question: When will we ever learn? Besides making me green with envy by getting 40 comments I did start thinking about the issue he raised. Why, with so much evidence of misdirected financial incentives driving behaviour that leads to major problems, do organisations still persist in using them? Pfeffer proposes three explanations:
- Lack of focus on understanding failure. Leading business schools do not teach history or cases on failure. Everyone reads about Google --- few spent time learning from the mistakes of others.
- Over-reliance on compensation as a management tool. Most people believe that others are motivated by money even if we know we are not. In a recent survey of people taking Law School Admission Test, only 12 percent said they were interested in law school for the money, while these same people thought that 60 percent of their fellow test-takers were. Coupled with the large compensation consulting industry most organisations overemphasise pay as an element in their management system.
- Omnipresent managerial hubris. Although most executives know that in many instances poorly designed reward systems have produced problem behaviour in other companies, they cling to the belief that such things won't happen in their organisations. The reason is simple --- they are smarter!
Know anyone or have you worked with someone who fits this description?