Competition Among Peers – Deming’s Third Deadly Disease

Photo by abac077 under Creative Commons Attribution

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Last week I did a posts here and here (and Bryan offered a different paradigm here) about the external motivation (carrot and stick) assumption of many performance evaluation / merit pay systems.  We’re calling this the “jackass series”.

Let’s talk about another assumption that underlies many of these systems – competition between peers increases productivity and effectiveness.  The effort to create competition can take on many forms.  Differential bonuses or annual increases, or forced rankings of peers.  Some go so far as to force somebody in the group to be put in a category like “needs improvement” or “C”.  In some of the most extreme systems people are “let go” for being placed in this category.

Deming wasn’t shy about what he thought about annual performance appraisals . From his 1982 book Out of Crisis:

The performance appraisal nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics… it leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior.

It goes to logic that if peers know that at the end of the year only one person is going to get the good bonus or the good raise and one amongst the peers might have to be put on the ‘needs improvement’ list, some people will do what it takes to get the money.  If you force rank or demand differentiation you are incentivizing that behavior.  You have designed a system that encourages individualism at the expense of teamwork and creates an environment where Machiavellian machinations will be rewarded.  It will work like Survivor, people will manipulate and play politics to get their rival ‘voted off the island.’

A performance appraisal is based on an employee and his or her supervisor and the needs and inter-dependencies of that relationship.  However in everyday work the employee has many relationships that are more important to the organization – those with his or her peers.  From Peter Scholtes in The Leader’s Handbook:

Each employee has a separate relationship with his or her supervisor, one that involves performance expectations and review.  Each member of a team has has a relationship with the team that involves expectations and interdependencies.  Sometimes the employee may be forced to choose between what is expected of him or her by the supervisor and what is expected by the team….Which takes precedence?  Usually in such cases the team’s needs will be displaced and undermined by each team member’s obligation to his or her supervisor.

Although most of us depend on other people to advance the performance of our organizations, peer ranking systems and pay for performance systems that ‘differentiate’ between peers leave us with the choice between doing what is right for the team and therefore the organization, and what is in our own economic interest.  Many people will do the right thing, but shouldn’t compensation and other human resource systems make that an easy choice?

Maybe for organizations that can’t get over the need to extrinsically motivate people, a system where at least ‘natural work groups’ can be rated against other ‘natural work groups’ so that at least people who work directly together will not be compelled by the possibility of financial gain to undermine those with whom they work most closely.

What do you think?  Does economic competition between peers drive high levels of performance or will it result in politics and Byzantine efforts to be rated an “A”.  It’s not a simple question and there isn’t a simple answer.  Comments welcome.  Please take a few seconds to take this one question poll:

Bruce

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8 Responses

  1. Thanks for the post. I like the direct quotes too. People would benefit from reading more of the great ideas in the best management books.

    Granted Deming’s books, I think, are hard for many people at first. I often recommend starting with the Leader’s Handbook and others, and practicing what they say, and reading blogs… Deming’s ideas are much easier to grasp once you have a good background in actually managing and thinking about management for years. His books also benefit greatly from re-reading over the years.

    Another great book on this topic: The Case Against Competition by Alfie Kohn.

  2. […] is Good blog certainly falls into this category. Yesterday, a new post was published there titled: Competition Among Peers – Deming’s Third Deadly Disease. Here is an […]

  3. Nice post! Again, there are so many misconceptions about what ticks people and about what are really effective teams. I wish more managers spent time thinking and talking about these subjects. I wrote a post of my own inspired by this one. Check it out:
    http://tinyurl.com/yc7nmyo

    Thanks!
    Elad

  4. I once worked for an organization that was run by former G.E. managers. In fact, I worked with a team of people to train the exempt-level staff company-wide in the old Neutron Jack ABC “cut the C’s” mentality. I believed in it, at first. Ironically, one of the values the company espoused was teamwork. When first implemented, people saw the nice benefits in it – for themselves. In time many a dejected employee shared with me the same feelings Deming described above. Of course they wouldn’t share these feelings with upper management. Fear reigned. It worked just as Deming said it would. Sadly enough, top management probably STILL doesn’t know what their people REALLY think about it.

    • Thanks for your comment Mark. I too believed in the ‘get rid of the deadwood’ mentality. I failed to see the fallacy. I thought Deming was right about almost everything ELSE (maybe some slogans are OK). Then I saw some of the people that were deemed ‘deadwood’. I had to start asking why. Did we hire deadwood? No. Then why did we let it die? etc. I think your are right about fear and that top management may sometimes be ignorant because they live in an echo chamber formed by fear (and maybe in some cases people who want to go along to get ahead.) As the program began to take hold a lot of people became very risk averse – be careful about what you commit to, some had guilt because they weren’t C’s and didn’t think they did better than some of the C’s, and a lot of people preemptively left. Hopefully the right people will realize some of the flaws in some of these programs.

    • “Of course they wouldn’t share these feelings with upper management” – this is part of the Toxic Tandem of managers and we have to be careful of that. I just wrote a post today about how important is upstream feedback and your comment seems to fit right into it: http://tinyurl.com/ybup55d
      This culture of not listening to what is going on around and below us is dangerous in so many ways…
      Elad

  5. Social comments and analytics for this post…

    This post was mentioned on Twitter by leanisgood: New Blog Post Competition Among Peers Deming’s Third Deadly Disease http://ow.ly/16fZOQ

  6. […] Over the last couple months we have posted several times on annual performance appraisals (The Jackass Fallacy,  Dan Pink’s & W. Edward’s Deming’s take on motivation,  Bryan suggests a better way, and competition among peers.) […]

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