Inventives: How much work is too much?
This post continues my series on Incentives -> Behaviours -> Culture that I started last week. This example will focus on the case of the number of hours that an employee can self-select to execute outside of their regular paid time.
Summary
This post covers natural and artificial incentives for employees to work outside their paid hours. When managed well, it can be healthy for the company and the employee. In most real-world cases, it is handled in a way to drive employees to perform the maximum amount of work for the same compensation or a reward that is significantly less to the company than the fully burdened cost of an employee (i.e. the company value generation per dollar, including the bonuses, is increased dramatically through this additional work).
Suppose a company incentivizes additional work by an employee and has no process to limit the total work done longitudinally. In that case, there will be a rising tide issue. Everyone will be driven to ensure they exceed the mean/median for their role and level to reduce the risk of job loss. The result will be a constant upward pressure on expectations. These actions create a feedback loop of employees needing to do even more work to keep up. Repeat and rinse.
This cycle is how most tech companies create a crunch culture and excessive work hours while claiming to be dedicated to a work-life balance. They allow these natural incentives to drive the virtuous cycle forcing employees to do excessive work hours and manage out those who do not want to commit to the needed levels of work. Any company that does not monitor and limit the total work effort by an employee is hoping to see this cycle play out.
Post
The observed behaviour is that employees may spend significant time working outside of paid hours. Some are working so many hours they are in danger of burning out. An employee that burns out and disengages from the company (either by quiet quitting or leaving the company) robs the organization of that person’s productivity, creativity, and institutional knowledge.
Incentives
Incentive #1: An incentive exists for a company to accept free (unpaid) labour from their employees. If a company can realize the additional work without extra cost, it can reduce its overall cost structure, making it more competitive. Given the relatively short-term nature of the stock market, having the immediate P&L impact of the extra labour will result in rewards (increased stock value) for the company.
Incentive #2: Employees enjoy their job and want to keep doing the work. There is satisfaction and a positive hormonal response for doing something you enjoy and getting recognized for the result.
Incentive #3: Doing more work leads to more experience in the field, potentially leading to more significant opportunities in the future. Building up more skills in your area of work and broadening your institutional expertise and understanding will make it easier for you to take on larger projects and drive more significant impact. The result is the likelihood of faster promotions and rewards.
Incentive #4: Given an average amount of productivity for a role and level, performance management will reward workers who produce significantly higher than the average and manage out those who are considerably below the average. The result is an incentive for increased work for increased rewards or fear of job loss.
Gamification
Gamification happens when there are external rewards for doing extra work. These rewards may exist because of Incentive #1. Alternatively, if the company can pay a fraction of the cost as a financial incentive, that will still be better than the total encumbered costs of another employee.
Gamification #1: It is hard to measure the productivity of workers responsible for creative outcomes. This issue includes fields like software engineering that require cognitive workloads and problem-solving. Many companies instead fall back to using work hours. For example, since development may be done entirely in the cloud, Google monitors whenever a file is opened, modified, etc. That way, the company can have a time measure for that employee. However, the gamification in these scenarios is obvious - once the observer knows they are observed, they can create false data to inflate their time metric without producing more work.
Gamification #2: Anyone who has worked on a group school project can understand that it is hard for an external observer to measure each group member’s share of work (impact). A person can engage across many projects and create a perception of driving impact (externally and internally) while doing little actual work. In these cases, a person is indirectly (or directly) claiming the work done by others. Externally, it appears that the person must be driving all the reported results for many hours. The reality is the opposite: they spend their work hours managing perception and depend on the team members to develop the expected results.
Gamification #3: Task inflation (sandbagging) is a standard gamification method to inflate the perceived work effort (hours) that someone is spending. The employee completing the task is perceived to have done more work than what was done to complete the job. In this case, a task’s complexity (and effort) level is artificially inflated.
Issues
Issue/Debate #1: Like any addictive disorder, employees can crave the recognition and reward loop to the detriment of their health.
Issue/Debate #2: A company that usually has employees working increased work hours cannot leverage additional hours to bridge a productivity gap for critical deliverables. Attempts to do so will encounter a case of dimensioning returns and increased risks to retention.
Issue/Debate #3: A measure of productivity based on the work output does not consider the entire value generation of the time spent by an employee. The learning and discovery phase (ramp-up time) increases an employee’s value because of increased institutional knowledge and hard skills. This time is often taken at the employee’s discretion, resulting in them doing it during off-work hours.
Controls or Management Actions
Control #1: Supporting an employee’s learning and growth is essential. This process (as discussed) increases their long-term business value. However, we need to track this time independently of their task execution time. With this separation, we can measure and schedule the time for both activities. It is also critical for performance management so that the correct feedback regarding task execution velocity can be provided without the ambiguity of time taken in the learning process.
Control #2: Group estimation sessions on well-defined tasks are a way to control for bias when determining the level of effort to be done. This process should include a feedback loop to measure the error of the estimate versus the actual effort executed. This error is then used to inform process improvements to minimize it. The forecast can then be used in the aggregate to measure and control an employee’s amount of work.