Friday, July 11, 2008

Incentives, short term thinking and altered behavior.

Incentives (and disincentives) are the tool used by management to induce certain types of behavior among the subordinates. The management can be in the public sector (example: a fine for speeding), and in the private sector (example: an annual bonus for an employee). But a lot of the times these incentives have unintended consequences. Once the person or organization figures out the metrics used for the incentive, they will do everything possible to have good results for those particular metrics. Everything else will be ignored as they become a distraction.

Slate today has an article about a scheme in Ulyanovsk in Russia where the governor cooked up a scheme to improve the birth rates in his region. Any woman who would give birth on June 12 would receive a prize. One woman would receive a grand prize - an UAZ off-road vehicle. It's easy to imagine what happened next.
[...] On June 12, while Russia enjoyed its day off, doctors all over Ulyanovsk struggled to survive the most hellish day of their professional careers. The region's maternity wards, which usually stood half-empty, were suddenly filled beyond maximum capacity. Masses of screaming pregnant women seemed to materialize out of thin air. Stressed-out and sleep-deprived doctors ran around frantically attending to patients. Most doctors were forced to work multiple shifts just to keep up with demand.

When the clock finally struck midnight and the last bloody sheet dropped to the ground, the tally was impressive. Eighty-seven children were born in Ulyanovsk that day, nearly four times the region's average daily birthrate. With just a few prizes, Morozov's team had found a solution to a problem that has haunted Russia for the last two decades. Or so it seemed.[...]

By any measure (used as metrics), that was a grand success. But not all is what it seems. Read the rest of the story to find out what happened.

2 comments:

h said...

Idiocracy

nazarian said...

Not quite an idiocracy. This is the way the politicians behave universally.

The Russians have recognized the problem (low birth rates) and now they have to figure out the way to fix it.

The problem is that like any other politician, these people are there for short term wins. Their motive is not to fix the problem. For that you need to find the root cause and then fix it. The root cause for low birth rates could be extreme poverty. Fixing that is a long term commitment and usually doesn't happen during the tenure of a low level aparatchik like the governor of a Volga region.

These people want some short term goal that is not very difficult to achieve. They achieve that, make a lot of noise and then move on after squeezing all the possible dividends.