Incentive compensation management has come a long way in past few years, and more organizations are willing to entertain innovative forms of rewarding employee performance. One thing to consider is whether a performance-based strategy can give rise to an unintended side effect that can actually slow down productivity. For a real-life example of a performance-based strategy increasingly coming under fire for its unplanned loopholes, we turn to the National Basketball Association. The NBA season is winding down, which means that while contenders are gearing up for the playoffs, the teams at the bottom of the standings are looking toward the future. For those organizations, it means figuring out a plan to get better – and it often starts with the draft, held each summer. Landing an early selection in the draft means that the team has its pick of the top players capable of turning around an organization in a hurry. Potential superstars – the Lebron Jameses and Michael Jordans of the world – won’t be available further down the board, so teams want the top picks. The NBA uses a weighted lottery system for assigning top draft picks, but basically it means the worst teams have the best chance at a premium draft position. On the surface, it makes perfect sense – its gives underperforming teams a better chance at acquiring players to make them competitive. But it’s had an unintended consequence that has increased in the last few years. It’s called “tanking” – effectively a team trying to lose as many games as possible in order to increase its draft odds. It’s a controversial topic, and one that not all people – including NBA higher-ups – agree is even happening. However, it does offer an intriguing lesson about incentive compensation management strategies. Is your organization losing on purpose? There’s obviously a lot of differences between a sales team and a basketball team – the sales team’s average height is probably shorter, for one – but there are ways that performance-based reward cultures can cause wrinkles. If your organization is set up in such a way that a defined percentage of performers receive a reward (the way that 16 teams always make the playoffs every year), it may not accurately match up with a larger group of team members who deserve to be compensated for their efforts. It may cause team members to tank – or underperform – if they think there’s little hope they will vault up to a higher echelon or want to build a case for changing departments. It’s not uncommon for workers to purposely temper their own productivity if they think it might get them removed from a project they don’t like or feels unfulfilling. So how do you stop workers from underperforming? It starts by having an incentive compensation management strategy that is flexible, rather than one that distributes rewards according to rigid metrics and increments. Truly outstanding performers should be rewarded accordingly. This can foster an environment in which it becomes possible for employees to try their best, knowing that they aren’t going to be halted by any ceilings. Fixing a hole Look out for employees who might be deliberately fudging their performance in order to get pulled from a project or given new responsibilities. Instead of shuffling the deck to accommodate these personnel and overworking your best employees, try to address it head on. It’s also important to recognize that every underperforming employee is different – SB Nation contributor Tom Ziller noted that, in the NBA, there needs to be an important distinction made between losing for losing’s sake and making a concerted effort to rebuild that might not pay immediate dividends. The same is true in any working environment. Sometimes a shift can help an employee – as well as his or her coworkers – but you have to ensure that it doesn’t look too much like a reward for a bad job.
