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Perverse incentives & busyness

A nursery decided to start imposing fines for parents who picked up their children late, in an effort to reduce tardiness and better manage its operations.

But instead of a decline, they experienced an increase in the number of parents who showed up late.

Why? Many parents switched from seeing lateness as a social ill that caused inconvenience and embarrassment, to viewing it as an additional service they now legitimately paid for!

The fines shifted perceptions of the value of lateness and the cultural norms that followed. And the nursery’s new policy had the exact opposite effect than what they had intended.

This is an example of perverse Incentives – incentives that unintentionally reward people for making the issue worse.

Perverse incentives can ruin the best laid plans of bureaucrats and business people.

There are abundant examples, but here we focus on:

Productivity theater aka Facetime culture aka Busyness.

The paranoia of productivity theater at work

Since the end of the assembly lines era where Taylor’s Scientific Management System thrived, managers have struggled to find appropriate ways to measure productivity. In the factory, work was predictable and of low variability; measuring productivity could be as simple as counting the number of items produced in a given time frame. Today though, more people work with knowledge - an asset that is neither visible nor predictable. In the face of this difficulty, and in order to measure output, companies started using utilization as a proxy, that is, seeking to extract more from each worker for an hour of pay. They turned their focus to how many hours of work were completed, instead of the value of what was achieved. Utilization is much easier to observe, and, at a first glance, it seems to make sense – more time spent working, more work produced. And so, this approach became common practice. In response, knowledge workers who wanted to get promoted (or simply keep their job), adjusted their behavior accordingly and started participating in the so-called productivity theater. Also known as facetime culture or busyness, the term refers to the workplace phenomenon of engaging in behaviors that give the appearance of working hard. For example, staying later than normal working hours just so that the boss sees how hard you work, and having many, long meetings. But productivity theater has downsides. Precious time and energy is being depleted because a (large) part of the day is focused on demonstrating busyness. This leaves less time and space to do the actual, deep work they were hired for in the first place. As a result, workers are doing less meaningful work and have less time to spend with their families, because they use a significant amount of resources to humor managers and act in the way this system rewards. Productivity and efficiency drop. Exhaustion among employees increases turnover, reduces staff engagement and increases absenteeism. Despite expectations, the situation has NOT improved with hybrid work. As managers lost the old visual cues of an employee working by walking down the hall or past the conference room, they have reverted to technology to track employee activity. In response, employees have felt the pressure to continue these theatrics while working remotely by, for instance, participating in virtual meetings they don’t need to be a part of and using mouse jigglers to simulate activity and make sure they stay green-dotted. According to a recent study, 54% of knowledge workers feel pressure to show they are online at certain times of the day. They spend an additional 67 minutes online every day, to show their colleagues and managers they are still present and ‘working’. Moreover, according to Microsoft research, this situation has led to productivity paranoia: a stark disconnect between the portion of leaders who say they have full confidence their team is productive (12%) and the portion of employees who report they are productive at work (87%). And while leaders fear that lost productivity in a faltering economy is due to employees not working enough, the hours worked, number of meetings, and other activity metrics have increased. All the while employee burnout is at a rise - Google searches for “burnout symptoms” hit an all-time high in May 2022.

How to fix the busyness problem?

  1. Reward output, not just activity. Distinguish between desired outcome (goal), output (actions towards goal) and input (activity and resources used). And in turn, measure and allocate the appropriate weight to each of these.

  2. Assess whether your organization is generating deep work and eliminating low-value work.

  3. Force people off the clock.

  4. Model the right behavior.

  5. Build slack into the system to allow for the planning fallacy.

You can find my full article as published by The Decision Lab here.

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