and Sam drills 310. Is Sam a better driller than George?”
Jim nodded,“ Sure.”
Harold shook his head slightly,“ Actually, we really don’ t know. When you think about it, each of the three is pretty close. When results are this close, we say that George, Dominique and Sam are part of a system. On any given day we could expect George to be number one, number two, or number three— same for Dominique and same for Sam. If the differences among them are so small that they can only be attributed to random variables outside George’ s, Dominique’ s or Sam’ s control, they are not far enough apart for the variances to be considered significant numbers. So when you look at the group and say that the numbers for George, Dominique and Sam don’ t give us any indication that one is outperforming the others, you are saying that George, Dominique and Sam are inside the system.”
At this point, Jim interrupted Harold.“ Maybe so, but shouldn’ t we pay Sam the most, at least for Monday? After all, he made the most holes.”
“ We could,” said Harold,“ but let’ s look at what we would be rewarding. Why are we paying Sam more? Did he work smarter than George and Dominique? Did he work harder? If we maintain that all three are within a system and that the one who drills the most holes does so for reasons completely beyond his or her control, then we are saying that something other than brains or effort made Sam number one on Monday.
“ Maybe Sam got freshly sharpened drills that morning and the others didn’ t. Maybe Sam got material that was just slightly softer and easier to drill than the others. Or maybe that day when George ran out of material to drill and went to the storeroom for more, he saw Sam was running low and brought enough for Sam too. If the three are part of a system, we are saying that the difference in their efforts and effectiveness is insignificant statistically and the value of their labor is indistinguishable to the company.
“ If we make the mistake of rewarding an outcome even when the contributions effectively were equal, the payoff becomes a lottery,” continued Harold,“ And what would happen if we did? George, Sam and Dominique would fight over the sharpest drills and the softest material. And would George ever take the time to see if Sam needed more raw material? No way.” The wheels were starting to turn for Jim, and he found himself nodding in agreement.
“ Now that you mention it, I’ ve seen stuff like this happen with the outside salespeople,” Jim offered.“ Except in sales if three salespeople each turned in an order to the manager, one for $ 290, one for $ 300 and one for $ 310, the one who sold $ 310 is the hero and the one who sold $ 290 is the goat. And, of course, because we pay our salespeople on commission, whoever sells the most takes home the most pay. And you’ re right, salespeople do fight over the‘ sharpest drills’ and‘ softest material,’ and they don’ t give each other any kind of help. Even so, with outside salespeople you have to pay them on commission or they’ d spend their afternoons at the movies instead of selling,” Jim said emphatically.“ You’ re lucky that your shop workers have to be on the shop floor where they can’ t hide instead of driving around in company cars.”