The Law of Unintended Consequences

"There are known knowns.  There are things we know that we know.  There are known unknowns.   That is to say, there are things that we know we don't know.  But there are also unknown unknowns.  There are things we don't know we don't know." -------- Donald Rumsfeld

I want to focus on the third part of Donald’s quote:  “There are things we don’t know we don’t know.”

Let’s look at a couple of examples:

1) HMO administrators wanted to keep costs down so they incentivized doctors for not prescribing unnecessary tests for patients. This was a worthy goal.  Doctors received a portion of their compensation package if they prescribed less than 50 tests a year.  (These HMOs were the original ones back in the 80’s.)

2) Frank, an Engineer, had 3 goals on his bonus plan.  They were all design goals. His target bonus as a percentage of salary was 10%.  However, if he completed all the design goals AND implemented them, an additional bonus of 10% would be awarded.

The managers in each of these situations were very pleased with the way they had designed the plans.  They thought they had covered everything.

Let’s look at what actually happened:

1) The intent here was to reduce the number of unnecessary tests and therefore reduce cost to the HMO.  A worthy goal.  All of the doctors ended the year with less than 50 prescribed tests .  However, as a result, some patients became seriously ill. Their problems could easily have been  detected by tests.  Doctors had not prescribed them, even in cases where there was a 50/50 chance they might be  needed.   In the end all the doctors received their bonus.  The costs to the HMO, however, increased due to the number of patients that became ill and required treatment. 

This was never intended to happen.

2) Frank worked frantically on his design goals and was determined to implement them as well.  Two thirds of the way through the quarter he completed the designs.  He decided he could get them implemented if he did the work himself --- bypassing the usual bureaucratic “system”.   He steamrollered the project implementations ---- flattening anyone who got in his way.  At the end of the quarter his projects were implemented.

His manager was appalled. He never thought that Frank would act in such an unprofessional manner. The fact that he completed both the design and implementation goals was great --- but he upset just about everyone in the group in doing so.

Although Frank received both the target and additional bonuses, he couldn't understand why his manager was so upset.   His manager told him that the “way” in which he implemented his projects was counterproductive and damaged relationships in the group.  

This was never intended to happen.

It’s difficult to think of everything, all the time, in every situation.   There will always be "unknown unknowns", loopholes, something left uncovered.   Humans are very clever at finding ways to beat the system. 

One way to try to prevent these "gotchas" from happening is to have your plan, proposal, etc. reviewed by several people in your group.   Sometimes a fresh pair of eyes can catch something you've missed.    This suggestion isn't very sophisticated, but it has worked for me.

Anyone want to share your experience with “unintended consequences” or how you avoided one?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque has also been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.  She lives in Dallas and has two much loved, 4-legged children.

Creative Commons image "Man in a Bucket" by katclay

Comments

[Dan Walter]

I have worked in areas where #1 became the norm. In fact I once watched CSRs who were paid for keeping calls short, simply hang up on people when the calls got close to the "limited time".

I have unfortunately, been Frank in my life. The short-term goals of the project became more important than the long term goals of the team.

Balance and counterbalance must exist in harmony or incentives are bound to fail. Great article.

[Jacque Vilet]

Hmmm . . . wonder if that is why the call center employees in India have hung up on me?

The "Franks" of the world --- seen a lot of them. Am guilty myself. That's why I think including "how the result will be measured" would help in goal design.

Thanks for the comment Dan.

[E. James (Jim) Brennan]

No one ever did anything they didn't think was in their best self-interest. Problem is how darn difficult it is to anticipate all the ways people can find justifications for doing what pays off for them rather than what you actually want them to do.

All goals can be described in terms of quality, quantity, time or costs, but those measures might not be numeric and are rarely well communicated. Perfection is impossible, although careful practice leads to improvement.

[Jacque Vilet]

Yeah I know. Humans are crafty critters. As Chuck and I know it's just like trying to herd cats!! They never do what you want them to do!

[Robert Bence]

Great information there, I have always wondered the right way to go about this, thanks for showing me!.All goals can be described in terms of quality, quantity, time or costs, but those measures might not be numeric and are rarely well communicated. Perfection is impossible, although careful practice leads to improvement.
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[Amy Trueblood]

Thank you for the insightful article and comments! I feel like these situations are directly translatable to the unintended consequences incentive programs can have. I posted a blog about the mistakes mentioned here, how they occur in incentive programs and what to do to correct them.

http://www.awardsnetwork.com/blog-post/d-oh-incentive-program-unintended-consequences-you-can-correct

[Jacque Vilet]

Hi Amy --- thanks for your comment. One of these days I will talk about a great (in my opinion) template for what I call a job profile ---- like a job description but shorter. It includes the "what" and the "how" of what is required for a job. Can also be used for performance reviews.

[Lauren Beth Shreve]

Good quote from Rumsfeld, and so true... I like Mark Twain's similar quote: "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

[Jacque Vilet]

Thanks for the Mark Twain quote. My favorites are the quotes from Yogi Berra!!
I was watching Donny on TV when he said the above. So funny. Really had to think about it!

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