The Wheels Continue to Come Off Pay for Performance

According to the August 25th, 2013 Washington Post online Bob Fearing waited 33 months for a decision from the Department of Veteran Affairs to make a decision about his ability to receive his benefits.  Although one might consider this an outrageously long wait time to receive a decision, according to the latest reports it is not unusual.

In 2009 the VA decided to implement pay for performance policies to speed up the processing of claims.  The wheels came off.  It backfired.  It didn’t work.  There were unintended consequences just like there always is when leaders attempt to control behaviors with pay for performance policies.

The claims processors at the VA were told they would be paid bonuses for increasing the quantity of claims they processed.  Naturally they chose the easiest ones first and left the more complex ones for later.  The result, a backlog of complex claims which are keeping our heroes from receiving the benefits they deserve.  The VA management paid bonuses to processors while the backlog of complex claims piled up to the sky. Management resorted to shuffling claims between offices in an attempt to get them processed.  Still, it didn’t work.

Pay for Performance policies cause negative unintended consequences.  In April of this year 35 school administrators and teachers were arrested for helping students to cheat on standardized tests in order to protect the receipt of their bonuses and school funding.  Which policy can cause a 56 year old grandmother to become a criminal?  Pay for performance can.

Pay for performance continues to fail in its attempt to create the right incentives for people to do better work.  First, it ignores the most important reasons.  The reason for processing the applications faster is to help the Veterans.  It’s not to help generate bonuses for the processors.  Second, it encourages unacceptable behaviors and damages relationships.  Finally, pay for performance policy prevents risk taking.  Why should the processors take a risk to handle a complex claim when the easy one will pay just as much?

Pay for performance is just another example of leadership malpractice. We must learn a better way. We must teach a better way.



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