Question

  Do you know of any cases, other than what was covered in the lecture, in which reward systems are inconsistent with the desired behavior? What is the impact of this misalignment?

Answer 1

Do you know of any cases, other than what was covered in the lecture, in which reward systems are inconsistent with the desired behavior? What is the impact of this misalignment?

An employee's performance review occurs when a business, together with its employees, reviews the work they have completed in the past, usually for a particular period. A manager sees many of the qualities that they want in their employees, such as effective communication, teamwork, collaboration with others, leadership, and effectively completed work. Given these reviews, the business can ensure that employees are aware of the company's views about them, and the employee knows what their strengths and weaknesses are in the company and what areas they need to improve.

Some examples of reward systems that are incompatible with desired behaviors:

• The promotion of employees is based on the number of assignments assigned by the company upon completion of the quality assignment. Think of a person who reviews 20 cases a day for car insurance, but most of them are wrong because they do not review the quality of the cases.
• The bonus depends on the number of sales of a product or service when the company wants to ensure that customers can afford the item. For example, in the Great Recession period, the housing market regularly issued loans based on "no income no jobs".
• A company wants to ensure that only the necessary medical procedures are ordered for customers, but employee rating systems are based on the number of services they provide.

The reason behind all these examples is that where the business is focused on one goal, performance measurement is on something else. It is necessary that an employee's rating should be based on firm goals rather than just an absolute amount to avoid these problems.

Impacts:

Some of the impacts of this misalignments are:

• This slows down the decision making process. Slow decision-making processes reduce the pace of business growth.
• Employees will not take responsibility and will lose control over everything. There is a possibility that when the responsibility will be taken by the person who is not eligible.
• Lack of motivation in employees.
• If there is a communication gap between employees and it is not open and free-flowing, or if people are cautious to share information, it affects alignment.