The Unintended Consequences: An Improvement that ends in a Disimprovement
Episode 033
Jun 28, 2023
Subscribe today
Unintended Consequences - The Cobra Effect
[Listen at approximately 00:12]
You're incentivising the behaviour change you want to see, so what could go wrong aside from considering human behaviour?
Inspired by a LinkedIn post from Brad Green, a corporate HSE professional, today's episode delves into the Cobra effect phenomenon.
Brad posed an intriguing question: "Have you ever tried to fix a problem, only to make things worse?" and described how unintended consequences can arise when incentivising desired behaviours or changes.
We've all had moments when we came up with a brilliant idea, only to realise months later that things have worsened.
So, what exactly is the Cobra effect?
The Cobra effect occurs when incentives are designed to help address a problem, but instead, they have the unintended consequences of inadvertently rewarding individuals for exacerbating the issue.
You've gone from wanting to make an Improvement and ending up having a Disimprovement.
Interestingly, the story of the Cobra effect originates from colonial times in India, where the British administration wanted to rid the areas where they resided of pesky cobras [venomous and poisonous snakes].
What is a Perverse Incentive?
[Listen at approximately 02:15]
The idea was simple - bring in a dead cobra, and you would be rewarded for helping reduce the cobra population in residential areas.
However, instead of focusing on eliminating wild cobras, people saw an opportunity to make easy money. They started breeding cobras and promptly killing them to collect the bounty. Cobra breeding farms began to sprout, and individuals were raking in profits.
Unfortunately, this approach didn't decrease the cobra population because there was no longer a need to worry about hunting for wild cobras.
In our research on this topic, we came across the term "perverse incentive" on Wikipedia, which perfectly encapsulates the situation.
A perverse incentive is an incentive that has an unintended and undesirable result that is contrary to the intentions of its designers. The cobra effect is the most direct kind of perverse incentive, typically because the incentive unintentionally rewards people for making the issue worse.[1][2] The term is used to illustrate how incorrect stimulation in economics and politics can cause unintended consequences.
~ From Wikipedia, the free encyclopedia ~
We can observe similar instances throughout history, emphasising the importance of being more mindful of these dynamics, whether on a large scale or even when trying to incentivise our children's behaviour.
Miss Shiloh
[Listen at approximately 04:28]
Karin:
Speaking of unintended consequences, I can't help but think of my cat, Shiloh. Over the years, whenever I would go to the coffee station in my kitchen to make myself a coffee or tea, she would often sit quietly beside me, and I might give her a little treat.
Now, she only needs to hear the kettle go on, and she's meowing to get the treat. The unintended consequence of giving her a little treat at that time has become an expectation, which can be annoying.
Is that a perverse incentive? It certainly shows how easily something that starts as a good idea can become burdensome.
But let's not digress—I'm not suggesting Shiloh is a troublemaker [not at all];
however, she gets pretty loud when you don't give her what she wants 😉
A Few Crazy Stories About Perverse Incentives
[Listen at approximately 06:07]
A few intriguing stories about perverse incentives that emerged during our research.
Afghan Poppy Farmers
One such incident occurred in 2002 when British officials in Afghanistan devised a program offering Afghan poppy farmers a substantial payment of $700 per acre to eradicate their poppy crops.
Instead of curbing poppy cultivation, the program inadvertently triggered a growth surge. Afghan farmers saw an opportunity to capitalise on the situation and began planting even more poppies with the sole intention of subsequently destroying the fields and claiming the financial reward.
This phenomenon became known as the "Cash for Poppies" program. To exacerbate matters, some farmers even harvested valuable sap from the plants before their destruction, effectively profiting from the cultivation and subsequent eradication.
Regrettably, this approach proved a significant failure, having the opposite effect of what was initially intended.
Javanese Locals
Another remarkable example involves the renowned 20th-century palaeontologist G.H.R. von Koenigswald, who used to pay Javanese locals for each fragment of hominin [human] skull they found. He later discovered that these locals had resorted to breaking whole skulls into smaller pieces to maximise their payments.
Unfortunately, this undermined the integrity and historical value of the findings.
1860s Transcontinental Railroad
One of the other ones [typical of human behaviour] was building the Transcontinental Railroad in the 1860s, where the U.S. Congress was remunerating contractors based on the number of miles of track laid.
In a turn of events, one enterprising contractor sought to increase compensation by artificially lengthening a section of the route. He constructed an unnecessary bow-shaped segment, adding extra miles of track to inflate his payment.
This case demonstrates how a flawed incentive structure can lead to distorted decision-making and unnecessary actions.
These stories serve as cautionary reminders of the unintended consequences that can arise from poorly designed incentives.
Where there's a Will, there's a Way
and sometimes we can look back and think it was entertaining - 'So what if people got more money for what they did - it may have hurt the budget a little, but did it hurt anybody? No.'
But then we come to incentives that can end up hurting.
One example [which was quite devastating] of funding fire departments by the number of fire calls made was intended to reward fire departments that did the most work. What this did is that it discouraged them from going and doing fire prevention activities in their communities, which led to an increase in actual fires. So it's about something other than the money.
What is the further unintended consequence that comes out?
In this instance, safety was impacted, the risk increased, and damage to property and the environment was done. How do we observe this in our working environments and ask:
- What is it that we're about to do?
- What could go wrong?
Incentives & the Unintended Consequences of Incentives
[Listen at approximately 08:19]
Karin:
I don't think that question gets asked enough, you know, people think, right, something's not working, or we need to increase the numbers on something. So let's throw out an idea. The intentions are likely very valid and mostly done with good intent.
I remember [this was some years ago] in the heyday of behavioural-based safety, the observation card was vital to improving safety statistics. So this particular story I heard about more than once [I was not on this project], and I think it was over in Indonesia.
The intention was to increase the number of observations made or incentivise people to do their daily observation cards. Well, in this particular case, they decided to reward everyone for every card that was submitted. And the rewards were household items, such as a cup or plate, a sheet, or a pillow.
So the intention was very, very good.
It was twofold - let's improve the obs cards and help people furnish their homes.
The effect was that they had 1000s of cards; we're talking 3000 cards a week type stuff. And they ended up, of course, in the bin because nobody was going to read them; the quality was rubbish. But there were many homes out there, and they had many lovely new items of furniture and kitchenware.
So other unintended consequences, of course, was the burden on the people who had to look at these cards and do something with them, throwing them away and losing any potential sound obs cards that might have been amongst them.
Nuala:
A more recent one was around a client with quite a solid safety management system and excellent categories around observations and how they were put into the system.
But with their clients, another vessel had an incident around drops. And because of this, they wanted to make everyone do two observation cards daily. So there must be one general observation and one observation just on drops. They designed a whole new form, a new way of doing it, and a new process around this.
The team I was working with onboard that particular vessel said, "Whoa, hold the bus here; we already have drops as one of the categories within our observation process." These weekly audits and monthly audit sees a whole process that is very robust around managing this.
The response was: 'Well, it's just one thing; it's not that much of an extra burden; we'll just do it to keep the client happy'.
And we ended up having quite a heated debate between the people on board and the people in town, to go hang on guys, you do not understand the burden this is going to place on the people in the workforce, and where this could potentially end up.
And after much debate, a review of the safety management system and evidence on how robust the safety management system was to deal with it, it was nipped in the bud before it became a disimprovement to the system.
What would have happened is that you would have had even less interaction because it's hard enough to get people to do one good observation in a day; now, you want them to duplicate the effort.
The Significance of Where & How We Place Incentives
[Listen at approximately 13:29]
Towards the end, we will discuss some key questions and a process to consider:
- How can we improve something before implementing it?
- How do we go about doing that?
It's important to note that we want to reward people for displaying the right behaviours, but it's crucial to consider how and what rewards are most effective carefully.
This principle applies to our current context and extends to other industries, such as the financial sector and projects. The key lies in finding the right approach that aligns rewards with desired outcomes. For example, you'll get an incentive if you do it within a specific timeframe.
The Hoover Dam Project
That reminds us of the leader overseeing the Hoover Dam project during the era when the U.S. Government embarked on large-scale infrastructure projects to stimulate employment. The project manager was incentivised to complete the dam faster, putting immense pressure on the workers to meet the deadline and stay within budget to secure the manager's incentives.
Unfortunately, the unintended consequence during that time was a higher rate of worker fatalities than necessary. It's important to note that health and safety regulations were different back then, with a higher tolerance for risk, such as accepting one fatality per million dollars spent, which is no longer acceptable in most operations today.
This example underscores the significance of where and how we place incentives. We can think of various sectors, such as financial institutions, where C.E.O.s are incentivised based on multiple criteria and raise essential questions:
- What's been hidden?
- What do people stop letting us know?
- What do we no longer trust is going on?
- What do we no longer do?
These questions are particularly relevant when considering infrastructure challenges in countries like:
South Africa
In some cases, substantial incentives were tied to the leftover budget at the end of the year, leading to more significant bonuses in certain government divisions. Consequently, there was less focus on maintenance, which would mean spending more, and inferior contractors were sometimes utilised to minimise costs.
The ripple effect of these decisions resulted in significant unintended consequences that have profoundly impacted the entire country. While we won't delve into the broader implications here, it highlights the importance of considering the larger picture and long-term effects when designing incentive structures.
How Bonuses for L.T.I. Free Days Hurt the Industry
[Listen at approximately 16:21]
On a recent project, some of our client's team raised an issue regarding bonuses for L.T.I. free days [Lost Time Injury], pointing out that other companies in the industry provide such incentives. They questioned why their organisation didn't offer similar bonuses and requested that we address this with management.
We firmly said no and emphasised that it is one of the things we are so proud of that this organisation doesn't do.
This response perplexed them, prompting them to inquire further about our reasoning. Recognising the significance of the situation, we requested some storytelling to share an important lesson about the adverse impact that bonuses tied to L.T.I. free days have had on individuals within the industry.
A few highly experienced individuals shared compelling stories that shed light on the severity of the issue. They recounted instances where injured workers resorted to extreme measures to preserve their bonus eligibility.
These stories included accounts of individuals being medevacked off the site while wearing immersion suits to keep their broken limbs immobilised and concealed.
The fear of being labelled as the one who jeopardised the team's chances of receiving bonuses led them to make risky decisions, resulting in near-fatal incidents. Workers would insist on being assigned to light duty, hoping to handle the situation themselves, only to find themselves later medevacked due to internal bleeding.
These stories revealed the troubling reality that individuals were willing to put their lives at risk to avoid being perceived as the ones who caused the team to lose their bonuses.
So, what does this lead to?
It results in regrettable unintended consequences where someone would rather not face judgment every day simply because: 'We won't receive that enticing bonus before heading home'.
Interestingly, the conversation quickly shifted as these stories emerged, and we promptly addressed the issue. It made perfect sense.
- You want to encourage people to speak up and reward the behaviour of bringing up concerns and issues.
- You can proactively address potential risks and hazards by improving the system and creating an environment of trust.
- You want to express your pride and appreciation for those who raise valid concerns, as they play a vital role in preventing harm or damage.
That's how you aim to reward the desired behaviours, fostering positive intended consequences rather than unintended improvements or disimprovements.
Rewarding People for Poor Performance
[Listen at approximately 18:55]
Another aspect worth considering is the concept of rewarding people for poor performance. What exactly does that mean? It refers to situations where the systems we put in place inadvertently lead to unintended consequences.
For instance, in an explosives factory, a rule was implemented requiring employees to take a chemical shower before meal or coffee breaks to ensure they didn't carry any potentially hazardous substances on their skin or person. However, unintended consequences arose from this rule.
- Those who didn't follow the rule were rewarded with the freshest food, better seats at lunch, and a longer break duration, allowing them to socialise with their colleagues.
- On the other hand, those who diligently followed the rules lost 15 minutes of their lunch break, missed out on the freshest food that arrived when the doors opened and settled for less desirable seats.
In essence, the rule-followers were punished while the rule-breakers were rewarded, and further unintended consequences could be a decrease in the number of people adhering to the showering rule, increasing the potential for long-term near misses and undesirable outcomes.
A similar dynamic can be observed in meetings.
When someone like Bob arrives late, everyone welcomes him, causing Bob to experience a small dopamine rush from the acknowledgement. However, this inadvertently punishes the punctual attendees who had to wait and waste their productive time.
If one person is rewarded for being late, the unintended consequences are that others may start arriving late or develop negative attitudes before the meeting even begins.
A more effective approach is to set a clear expectation that the meeting starts at a specific time. If someone walks in late, inform them that they have missed the introduction and must catch up on their own.
By implementing this approach, people quickly adjust their behaviour and arrive on time.
Intention, Action & Effect
[Listen at approximately 21:07]
In Brad's post, he emphasised the importance of intention, action, and effect. Reflecting on the example of observation cards:
- the intention was commendable: to increase safety awareness and encourage people to speak up.
- However, the action taken was flawed—a reward was given for every card submitted, regardless of quality.
As a result, thousands of cards ended up in the bin, but people were content because they received rewards. Unfortunately, the desired outcome was not achieved.
When faced with such situations, abruptly stopping the initiative can lead to discontent and potentially reduce the number of cards submitted, which could have negative consequences. We must avoid incentivising behaviours that encourage hiding, denying, underreporting, or covering up issues.
So what should we consider before implementing something new? Here are a few ideas and key points [thinking about the three words, intention, action, and effect are overarching].
1 - What is the purpose and intended outcome of the new initiative/incentive?
2 - Do we require a new process or system, or would a targeted campaign to address underlying concerns suffice?
Often, we need to look into the possibility that revitalising, simplifying, or adjusting existing approaches could effectively address the current needs instead of reinventing the wheel. This rings true in many cases.
[Listen at approximately 23:37]
3 - How does this compare to the current system/reality?
Another vital aspect is how the new idea or incentive compares to your existing systems and realities. This is often overlooked but crucial.
4 - Ask as many of the stakeholders as possible how this will impact them.
Often, new ideas are formulated without involving the frontline where implementation will occur. It is essential to engage as many stakeholders as possible and seek their input on how the proposed changes might impact them. By including the people affected by the new idea, you can gain valuable insights and uncover perspectives you may have yet to consider.
This is one of the most vital steps in the process.
5 - How could this incentive be taken advantage of?
Additionally, it's crucial to anticipate how the incentive could be exploited or taken advantage of, as demonstrated by the Cobra effect example.
6 - What are potential unintended consequences?
Understanding the potential unintended consequences is essential.
7 - Ask, "What could possibly go wrong?" and "What else?"
When considering human behaviour, it is essential to continuously ask, "What could possibly go wrong?" and follow it up with "What else?" Keep asking this question until there is a moment of silence in the room for more than 3.5 seconds. This tactic helps uncover potential risks and challenges. It's not about crushing ideas but ensuring that the implementation aligns with the intended purpose and avoids falling into the trap of the Cobra effect.
The Goal
is to prevent a situation where, six months later, you realise that the well-intentioned incentive has become another example of the Cobra effect. By thorough evaluation and continuous questioning, we can mitigate the risks and ensure that the implemented changes truly serve their purpose.
Take the time to think before your great idea becomes another example of the Cobra effect.
Psychological Safety Masterclass
We have been super busy building our Psychological Safety Info Hub to coincide with this Masterclass. Maybe you already have some idea, perhaps you don't, maybe you have started implementation, and maybe you still need to - either way, you will get some value from this session.
Join our Director, Karin Ovari and the Africa Scotland Business Network for an hour on this critical topic.
Psychological Safety Masterclass [Register Here]
Thursday 6 July 2023 at 13:00 UK / 14:00 South Africa
It will be an overview of what it is and is not and how to start the conversation by understanding your vulnerability and leadership.
It is free, and you do not have to be a member of the ASBN for this event; however, this is a taster of what you can expect should you wish to join networking with a difference.
Resources
- LinkedIn Post by Brad Green, Corporate HSE/PSM Professional
- LinkedIn Article by Mark Kissack - The Cobra Effect and Carbon Reduction
- YouTube Video by rewboss - German Word: Verschlimmbesserung
- From Wikipedia, the free encyclopedia - Perverse incentive
- Article by Eddie Hammerman - The Cobra Effect: What could possibly go wrong?
About the Show
Our purpose in sharing this podcast is to have a chinwag (conversation) to help people change how they think and behave about safety.
We do this by engaging in dialogue and testing the levels of trust and psychological safety, which are core to organisational culture. Making safety part of your DNA so that your people speak up, show up, do right, and become safer every day for yourself, your team, and your business.
We will explore topics related to organisational and safety culture, leadership, the language of risk, emotional literacy, psychological safety, conversational agility, intercultural intelligence, and whatever else pops up during our conversations—sharing our experiences and learnings.
We intend to share nuggets of wisdom that will challenge your perspectives, potentially solve a nagging problem, share actions you can implement, and give you at least one aha moment.
And, if you enjoyed the show and gained value, please share with just one other person to help spread the word.
