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I work for a big four accounting firm and we have a very different culture. We bill by hour but we are encouraged to spend time coaching and teaching and it really pays off. We have anonymous upper feedback which is used in compensation and promotion decisions in manager level and above - your work product gets you a salary increase, but you can also get a bonus for teaching, volunteering, and taking part in firm's initiatives. Now, these are not wall street bonuses, but still. Granted you can still find a jerk here and there but they are not pervasive. I think the firm is a great place to work and I love our culture.


Bob - here, here. But what's your alternative ? That's a very serious questions as incentive systems will always be with us. The article appeals to two key points - 1 dimension systems being the problem and good management the answer. Now I've designed my share of sales plans and the guys always found the holes no matter what. But it strikes me that good mgt ain't a sufficient answer. We need a multi-dimensional incentive structure that balances things out. In the MER example overall team performance across the newbies and the salted would have helped for example. In the collapse of the FinInd why can't the rocket scientists who designed CDOs design a proper incentive system that balances risks and rewards AND short-term and long-term. If you make sustainable l.t. profits with minimized and appropriate risk then you get paid.
This strikes me as a fundamental and mission-vital problem in organizational design worthy of your and your colleagues best efforts and sorely and sadly needed.


The modern law firm is a sick organizational form. The way they rank them is by "profits per partner," essentially glorifying individual stars who succeed at the expense of their colleagues and families too. The law firms also play funny games, labeling as few people as possible as "equity partners" to make it look like they are making money per partner than they actually are -- not all firms and lawyers are that bad, some are somehow able to transcend this sick system. But I still recall talking to a sad and worn-out looking lawyer at a big East Coast firm, who had made a couple million bucks the year before, who lamented at how inhuman his firm -- and him too -- had become in the process.


It sounds like the way law firms compensate their attorneys. Every hour spent training a new attorney was one less hour that could be billed to a client.



Greed, Greed and Greed...

Still as the rest of us simple people of Ireland endure our over paid politicians spare a minute for this wonderful blog that we received, it’s simple but perhaps can help in these terrible economic times created by a few greedy individuals !

Enjoy, reflect, react !




Your alternative hypothesis could be ENTIRELY correct. If you believe that organziations become excellent through the actions of independent -- rather than interdependent -- solo superstars (a set of beliefs consistent with some economic theory), then your speculation is spot on. Great comment, it has me thinking!

Matt Moore

Hmmm - "It surely never dawned on the person who set up Merrill Lynch's incentive system that the traders' bonuses would make training new employees impossible"

Very probably but there is a slight chance that ML wanted to weed out those employees who required some support and be left with the tiny number that didn't. Very costly from a recruitment perspective but not necessarily unintended.

Wally Bock

Great post, Bob. But I think it's more than just thinking about money. I think what you describe happens in any internally-competitive culture. I stumbled across this when I was writing Net Income in the mid-nineties. I got great cooperation from people at Hewlett Packard and Sun Microsystems, but I never could seem to get anyone at Microsoft to talk to me in a helpful way. Finally one kind soul who had worked there told me that "there are no points for cooperating with you" and therefore anyone who did so was giving up time they could be doing something that gave them an advantage.


Mmmm... I wonder if the incentive scheme trained the people to become jerks or that this type of reward attracts jerks?

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