The Cobra Effect

Embed from Getty Images
I’ve written several posts based on Neel Doshi and Lindsay McGregor’s book Primed to Perform. In the book, Doshi and McGregor discuss the differences between tactical performance (the ability to follow a plan) and adaptive performance (the ability to diverge from a plan.)

Companies that rely on tactical performance must make trade-offs, they write.

• The trade-off between quantity and quality
• The trade-off between individuality and teamwork, and
• The trade-off between near-term and long-term results.

They go on to describe one of the worst effects of cultures that are low on motivation and managed by a team that believes in external (indirect) motivation. They call it the Cobra Effect, and it’s a classic (and hilarious) example of incenting the wrong thing.  Here’s the passage in its entirety.

Many people travel far and wide to see wild animals, but in the cities of India you can still sometimes see buffalo, leopards, and cobras roaming the streets. During the 1800s, when India was under colonial rule, the British governor reportedly set out to reduce the number of cobras in the city of Delhi by paying bounties for dead cobras. At first, the plan went as expected. Dead snakes were exchanged for the bounty and the cobra menace seemed to be under control. But all was not as it seemed.

A few shrewd entrepreneurs realized there was good money to be made from dead cobras. So what did those enterprising citizens do?  They built cobra farms to raise more snakes! When the colonial rulers realized what was happening, they canceled the bounty. And when the value of cobras plummeted, the snake farmers had no choice but to release their crop. In the end, the cobra population of Delhi increased.

Doshi and McGregor state what’s obvious (in retrospect): the government failed to realize that what they wanted wasn’t more dead cobras – they wanted fewer live ones. They had rewarded the wrong thing simply because it was easy to measure.

Call centers famously do the same thing. Measure the length of customer service calls and you get short calls – not satisfied customers. Enterprising employees will find ways to improve their numbers (hang up on two calls for every one you spend time on) instead of helping customers solve problems.

We have a long economic tradition of measuring and paying for the wrong things.  We pay workers by the hour instead of for completing a task well. We pay writers by the word, instead of for thoughtful and accurate work. We pay doctors per visit, instead of paying them for a cure. We reward students (and teachers) for passing tests instead of mastering the material. We measure outputs in government programs (services delivered) instead of outcomes (clients obtaining meaningful employment.) We measure how quickly a report is submitted, not the quality of its analysis.

One of my favorite old jokes goes something like this:

A car owner has an electrical malfunction in his engine. He takes it to a master mechanic to have a look.  The mechanic reaches into the engine compartment, tightens a single wire, and the car’s problem is magically fixed.  He turns to the car owner and says, “That will be $200.” The owner, incensed, says, “That took 2 seconds!  I’m not paying you $200 for 2 seconds of work!”

The master mechanic looks him over coolly and replies, “You’re not paying me for the 2 seconds of work. You’re paying me for knowing which wire to touch.”

When we finally figure out what to measure, we’ll figure out how to get what matters from our workforce.