How bad incentives can lead projects astray, and how to set things straight

This is an excellent example of a perverse incentive, which is an incentive that has unintended negative results often directly opposite the problem the incentive was trying to fix. This inspired us to consider ways we can help our government customers avoid similar issues in the services they operate.

While there is a great deal written about how perverse incentives can lead to unintended outcomes, we wanted to focus on how using the right incentives can drive the right behaviors — both at the individual and organizational levels. Our ideas below are not meant to be a declaration of immediate change to everything an organization may be doing. They’re meant to be a guide to help identify areas of improvement in how organizations frame objectives and design incentives so that they encourage behaviors that lead to the best outcomes. While not comprehensive, we believe the topics below are key factors to consider when incentivizing efforts and teams.

Frame objectives around outcomes not outputs

Government agencies and vendor teams building digital services should frame their objectives around enabling people to access tools that help them achieve a goal that is important to them or improves our society. While ensuring teams are productive is an important part of accountability, the driving concern should be whether a service allows people to meet their goals and whether that service is improving over time. Incentivizing outcomes for people will help teams avoid wasteful or low-value work.

Identify the problems that need to be solved

While it may seem straightforward to identify a “North Star” outcome, it’s much more challenging to unravel what needs to be done to get there. The selected problems should not simply be based on the loudest voices. Balancing user, agency, and other stakeholder needs and perspectives ensures we focus on the right things. Make certain that people who represent these various perspectives have a seat at the table when prioritizing or at least proactively get input from them beforehand. And plan for change to account for shifting facts on the ground when evaluating solutions or digging further into problems. Often, tackling what seemed like the core task or problem at the beginning reveals underlying issues that need to be resolved.

Ensure the proposed solutions don’t create new problems

Often, a problem has a seemingly simple solution. At Ad Hoc, we’ve found that frequently “quick” solutions create data and performance issues or can introduce usability and accessibility challenges. Take the time to evaluate proposed solutions to reduce the risk of moving the team two steps forwards and one step back. Note that discovering a deeper underlying issue is progress, but creating new problems is counterproductive.

Reward ownership of outcomes

Every team working on a product needs to be aligned to the same outcomes for the product to be successful. Frequently, different teams are given different objectives. While individually the separate objectives may be good, if there is no one responsible for ensuring they’re all working toward the same larger outcome, the teams risk diverging as they work toward their individual incentives. Assigning clear, empowered ownership of the overall outcomes ensures there is someone responsible for maintaining and incentivizing alignment between teams.

Encourage shared knowledge and collaboration

Without the ability to jump across team or disciplinary lines to help achieve outcomes, even the best intentions can become mired in roadblocks. Just as everyone needs to be aligned to the same outcomes, they should be rewarded for both going beyond their role in helping to achieve them and for enabling others to gain knowledge and skills that help move things forward.

Measure what really matters

Metrics are often framed as “how many visitors came to the site?” and “how long did they spend on-site?” These kinds of vanity metrics don’t help measure the impact of the service being offered. Instead, your agency or team should design metrics that focus on outcomes for the people your service supports. For example, “what percentage of eligible Veterans were able to successfully claim their benefits?” or “how have infection rates changed across hospitals nationwide?” This can help build positive incentives that reward teams for delivering the most value to end users.

Incentives are a powerful way to shape individual and team behavior. In government, these incentives often arise from an environment of complex constraints and overlapping interests. It’s easy for reasonable goals to become perverse incentives that can harm team productivity and the final product. Agencies and vendor teams need to make a focused effort to design positive incentives that keep teams focused on the highest value work for the people who use the service they’re building.