To change a culture, follow the money


(Photo by EPA/JIM LO SCALZO)

Journalists, prosecutors and investigators like to use a simple phrase: Follow the money. The same should be said to any manager looking to overhaul a culture or revamp an organizational bureaucracy.

Follow the money.

In David Fahrenthold’s story about the culture of coverups at Veterans Affairs that ultimately fueled the resignation Friday of the VA’s chief, Eric Shinseki, one line is critical: “In some cases, local officials’ bonuses depended on the numbers looking good. So, at some point years ago, they began asking clerks to change the numbers — with practices like ‘zeroing it out.’"

Fahrenthold details all the other ways a bloated bureaucracy caused an organization to falsify records and allow wait times for veterans to grow unchecked. An influx of veterans in the Iraq and Afghanistan wars meant a swollen caseload. To deal with all those new veterans, “the agency grew thick around the middle again.” There was outdated technology. There was no "feedback loop" for getting truthful data back to the top brass.

But like so many stories of scandal, wrongdoing or bureaucratic misdeeds, money seems to have also played a role. And a relatively big one, it appears. The Daily Beast reported that VA directors associated with facilities accused of falsifying records received annual bonuses between $9,000 and $15,000.

That may not be Wall Street money, but the idea is the same. Bonuses that incentivized risky behavior in traders were at the core of the financial crisis. Extra pay for high test scores have been the root of school cheating scandals. Incentives that reward short-term performance urge CEOs to manage by the numbers.

The list goes on.

Shinseki was applauded by his former second-in-command for trying to open the lines for bad news and for spending time with regional managers. But when people are encouraged to do one thing (speak the truth) while being compensated for doing another (reporting low wait times), the one that stands to earn them more often wins out.

Of course, the incentives were designed for the right reasons: To minimize wait times, and keep top executives in the know. Yet that's the thing about incentives. Managers have to think not only about what they're designed to reward, but what they could unintentionally lead people to do. The quickest and best way to overhaul a culture is to take a hard look at how people are rewarded — and how those rewards might prompt unwanted behavior.

Read also:

How the VA culture of coverups began

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Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.
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Jena McGregor · May 30