You get what you reward

In the last couple of months I've found myself recommending Steven Kerr's article "On the folly of rewarding A, while hoping for B" several times, and felt I should share it more broadly.  It's a classic (1995), and is short, sweet, and always worth the reminder.

I'm reminded of this when I see a friend of mine struggling with launching a new product to market.  He is rewarded for successful launch of new products.  His manufacturing counterparts, however, are rewarded for delivering the lowest cost, fully optimized products that can be produced.  Their metrics are the same for new products as they are for existing products.  I asked whether the manufacturing group could be rewarded differently for new products, maybe being measured on fewest number of days to make a new product.  Of course, my friend was quick to laugh at such a suggestion.

Clearly we can see the waste that is created in the system here, and the unnecessary hurdles that are put in front of the innovation goals the company says they want to achieve.  And of course, the manufacturing group doesn't want to be the reason why their company is less successful at launching new products than their competitors.  But with the current system in place, this is surely what will happen.

Reward systems are one of the easiest things a company can change, and they are often the last thing that a company recognizes should be changed.  And because the development cycle often carries the burden of different reward systems that have been developed in individual silos, the true consequences of changing one reward system can be difficult to assess.  In addition, companies may be better served by creating reward systems based on end results than by discipline.  In my friend's case, everyone who is responsible for launching new products needs to be rewarded to make that happen, and not by discipline.   

If your company has clearly stated its desired innovation goals, and is having difficulty launching new, consumer relevant products, look at the reward systems in the development process.  Don't look only at the obvious rewards.  Really dig into the whole system and look for any inconsistencies.  I'm sure you are getting exactly what is being rewarded.