Complacency and Incentives

We know complacency is a bad thing, but we are all guilty of it. But while we may not always look both ways before crossing a road, hopefully few of us are complacent to extent that major repercussions are created. But the nature of complacency means we aren’t always aware when we are doing it.

Incentives are an important part of business. These don’t have to be financial, but they have to be aligned to the long-term objectives of the organisation. When they aren’t, trouble can be caused.

A couple of things have left me pondering over complacency and incentives recently. The first is the rather obvious example of the financial crisis. Despite studying economics as part of my degree, the situation is far too big and complex for me to even begin to grasp – I’ve only recently got my head around what an ISA is.

But when you see terms like “too big to fail” and “golden parachutes” bandied around, you know that something is wrong. Short-termism appears to have been prioritised over long-term growth due to the bonus schemes of the interested parties, and people such as Umair Haque are arguing that capitalism as we know it should be destroyed. But, again, this is not something I fully understand.

I know a bit more about football (association, though my gridiron knowledge is slowly improving), and the team I support has just been relegated. And they fully deserved it.

Ever since Bobby Robson was fired for finishing 5th, the team has been a joke. Overpaid and over-the-hill players were brought in to accompany Newcastle’s innate ability to recruit inept players from foreign leagues. With their huge contracts (15 players are reputedly on more than ¬£50,000 per week – and these contracts are usually after tax) dwarfing any win bonus, and with seemingly little pride on show, there was little incentive for the players to perform (see also: Winston Bogarde). Particularly since they are guaranteed to earn the same amount of money even after relegation.

The players were complacent; they believed their own hype and viewed their wages as symbols of their skills. When the rot set in, nothing could be done to motivate the players to increase their efforts.

I (hopefully) don’t have been problem. As has been noted, this blog has been quieter recently. Aside from weekends away, this is because I’m working longer hours, and my job is a bigger priority than this blog. This isn’t a complaint – I’m having a great time. But in a company of 12 people that largely undertakes ad hoc commissions, there is no safety net and nowhere to hide. If we don’t perform, we don’t earn.

I’m not complacent because my incentive is to contribute to keeping the company in business, and thus keep a job.

How many of the companies undergoing traumatic experiences at the moment have been complacent in the past? As companies look to restructure, they should also look to why people want to work for them. Is it the money, or the desire to succeed? Is it aligned with the company objectives, or isn’t it?

sk

Image credit: http://www.flickr.com/photos/29487767@N02/

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3 Responses

  1. http://www.agencynil.com/

    Hi Simon, fascinating thoughts as ever…If I wasn’t so busy trying to deliver I would have more to say, but I think the link I have included is one that may be pertinent, or maybe just food for thought

  2. Cheers for that Mat. Hope thing are well with you, and am appreciative (and surprised) at your lack of football reference

  3. […] Complacency and Incentives (curiouslypersistent.wordpress.com) […]

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