Organizational Environments and Motivational Incentives – Part 2

When we get up in the morning – if it’s still dark – we flip the light switch and expect the power to  come on.  If it does, we don’t thank the power company or write appreciative notes, but if it doesn’t we will complain loudly to whomever will listen and look for someone to blame.  The nature of service providers is that they rarely get thanked for doing things well, but if something goes wrong, they will get criticized, chastised, blamed and castigated.  Government organizations are like utility companies, they are in the service business.  Government politicians need to avoid blame in order to get re-elected.  News media reporters – working for news papers, TV and radio – especially in this age of investigative journalism – are constantly looking for something wrong and someone to blame.  Good news rarely makes the headlines, but bad things will show up on page 1.  “If it bleeds it leads” is too true.  So survival of one’s political career seems, more frequently than not, to be a matter of avoiding blame.

But the problem does not end with elected officials, career government employees rarely get lauded for doing things well, but if things go badly, they will get blamed and careers can be ended.  Their best defense it would seem is to follow the letter of the law or the regulations.  The FAA apparently did this by assuming the sequester law calling for across the board cuts meant cutting all FAA functions equally.  Congressional action countered this action and allowed less critical functions to be cut more and air controllers to impacted less.  Some think this was the intent from the beginning, but the “across the board” literal mandate was the FAA’s defence.  Phillip Howard a few years ago wrote a book lamenting The Death of Common Sense.  While there is truth to adage that there is an exception to every rule, government regulators often do not allow any variance even when “common sense” makes the need obvious; and even if exceptions are needed for the real intent of the regulations to be accomplished.  Using judgement or common sense presents a risk to being blamed and dismissed if anything goes wrong, whereas following the letter of the law provides an accepted defense whatever the result.  Employees of customer oriented companies in the non-regulated private sector are expected to use common sense in dealing with customers legitimate needs or complaints – otherwise business will be lost because those customers can go elsewhere.

In the case of regulated utilities like our electric company refered to earlier, customers may not have an option to go elsewhere for service, but there is some check on their actions and responses because some government entity (independent of the company) is responsible for providing this check.   But there is no higher authority to check on government.  Newspapers and other news media would have us believe that is what their role is.  But their main motivation seems to be to sell papers or TV time and current conventional wisdom that is best done is by sensationalizing well understood events.  Effective checks and balances usually requires detailed knowledge and research which often is “dull and boring”.  Even if they were incented to do in-depth, detailed and knowledgeable reporting, they probably don’t have the time, or the knowledgeable resources to carry that out.  In the case of regulated utilities, the evidence – confirmed by personal experience – indicates that while we may get good service for a reasonable price, we do not get the cheapest most efficient price.  Without competitive options, the companies respond to the most common complaint – e.g. when we flip the switch and complain that the lights don’t come on.  So the emphasis is on reliable service, and the companies spend a lot of money, with probably some “gold plating”, in the name of reliability.  In the case of the electric service an emphasis on reliability even at a higher cost, might not be bad option.  Regulated utilities are area monopolies because a judgement has been made that it is a type of market where a competitive environment could not serve the public effectively in all respects.  Fortunately there are very few products and services such as this because in a perfect world, it would be nice to give the customer a choice based on the things that are important to him.  Individual choice is, after all, one measure of freedom.

I have no reason to believe that people working in government jobs are any more or less inherently moral than those in the private sector.  But the incentives are clearly different, which can lead to significantly different behavior patters and different results.  The conventional wisdom of the media is that all those working in for-profit organizations are “greedy” and by difference those in other sectors are not.  (The media of course exempts itself – even though they are part of the “for-profit private world” because they have a “higher calling”.)  The only sector that probably has a legitimate claim to a higher calling are the not-for-profit private organizations.  I know a lot of people in those organization who are there because they truly feel a responsibility to help people in need.  But like the for-profit companies, they need enough revenue to cover their expenses or they too will fail.  There are obviously people in the private sector who are morally deficient – including some in the not-for-profit world.  But I’m with Douglas McGregor on his theory Y assumptions that most people want to do good, and given the right environment – they will.  But organizational environment, culture and incentives are important and these can vary significantly among sectors of our society.  Everything else is not always equal.

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About tjc13

BE - Chem Engineering, Vanderbilt Univ, MBA, University of Tulsa - Worked for an energy and chemical company for many years and then started a management consulting business working for both for-profit and not-for-profit organizations.
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