Rules and Incentives are the Booby Prize

Rules and incentives don’t produce excellence according to Barry Schwartz in his book, “Practical Wisdom: The Right Way to Do the Right Thing.”

When problems exist in companies, the first impulse is to increase the rules or establish incentive programs to resolve the issues.

For example, if the schools are failing, establish rigid curricula and scripts for teachers to follow.  If a company is not profitable, establish an incentive plan to get employees “thinking like owners.”

The fact is that we cannot micromanage or incentivize our way to excellence.

HR POINTER: Excellence is a matter of individual character and organizational culture.

In his book, Schwartz references Aristotle and Aristotle’s belief that good societies depend on people of good character and good character is something that can be trained.

As such, one of the hallmarks of excellent companies is their recruiting and interviewing efforts to find individuals who exhibit the character traits that support the organization’s mission.

Another hallmark of an excellent company is a culture that models good character.

Schwartz notes that the culture plays a key role in the character development of employees and an employee’s sense of responsibility for “doing the right thing.”

He uses the example of a national charter school movement called Knowledge Is Power Program (KIPP)

The founders of KIPP realized that the most important thing that kids need to learn is character.  If you can teach them character, respect for knowledge, respect for the educational process, respect for the teacher, respect for one another, then teaching them how to add and subtract is trivial.

The question is then, “How do you teach character?”  The answer is that you teach character by showing it to the students every minute of every day.

In other words, lead by example.

Leading by example is the “secret sauce” of organizational culture as well.

Leaders need to stop making lofty speeches about “our employees are our most important asset” and start exhibiting character traits that model that adage.

If leaders can model good character traits, then respect for customers, respect for coworkers, and respect for the firm’s mission will fall into place and organizational excellence will simply be the byproduct of such efforts.

If leaders cannot model good character, then rules and incentives become the booby prize “awarded” to the poorest performing companies as they attempt to push employees to get results.

If you are interested in reading the full article about Barry Schwartz, click the link below: http://knowledge.wharton.upenn.edu/article.cfm?articleid=3133

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One Response to Rules and Incentives are the Booby Prize

  1. Richard
    Your news letter is great! I really injoyed the information from Barry Schwartz. I plan to use this for management leadership training.
    I really wish our government leaders would follow this type of leadership.

    Thank you
    Earl Stoltzfus

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