The Ethical Conflicts Created by MBO Incentive Programs by Barry Koplowitz
Is there anyone who actually believes that MBO Incentive Programs are beneficial? Everyone I know in the Information Technology industry can site several examples of serious mistakes that were PUSHED through because someone, or several someones, had an MBO deadline. We have all seen these conflicts of interest again and again. I have seen, (but will not site), a single project cost one company several millions of dollars because some people had too much at stake to let it fail. It should have failed. If you count effectiveness to cost, it did fail. But it could have failed sooner...and far cheaper.
Let s make up a story. It s coming up on John s MBO deadlines and he has to get something done by the end of the month, or quarter, or maybe even by the end of a certain day. He knows that other things are more important for the company, for his teammates, or for any one of many other reasons. He also knows that he loses several thousand of HIS dollars if he doesn t push it through to make his MBO deadline.
So, should he do it? Does he push it though and make his MBO? Let s say he gets his $5,000 MBO bonus, and ends up letting other things go undone...costing the company $500,000. Did he do the right or wrong thing? What would you do?
Let s make it more fun. Let s say that only he knows that $500,000 could be saved. What should he do then? What would you do?
Let s make it even better. Suppose he isn t really sure himself that he could save the company $500,000 and he would have to bring up a whole new project costing nothing but his own time, in order to make the determination. However, he would then miss his MBO. What then? What would you do if you were John?
We all have been in meetings where you can tell that someone is refusing rational steps that would delay a process, that should be delayed, because they have an incentive to get it done now. We all have seen the carnage and additional costs in which such tactics result. Sometimes, it s we who pay those costs with extra hours and weekends to fix the rush jobs...after the fact.
Have you ever missed an MBO bonus because you were too busy helping a colleague?
Have you ever missed an MBO bonus because you were working too many weekends, for free, to see a none MBO project get done on time...or to fix production problems? How did you feel?
Exactly.
So, I say to all the Senior Managers that continue to blindly follow this policy...pay what your people are worth. Don t hang carrots. Don t create conflicts of interest. The only thing these incentive programs motivate is conflict, stress, and in many cases millions of dollars in losses due to foolish things happening because they were part of an MBO agreed to 6 or 12 months earlier.
One final word. This does not mean that you pay your employees less. Rather it means that you pay more...in salary...and let your staff help your company grow, as is their job and in most cases, their goal.
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