Hard Facts: Innovation

More wisdom from Hard Facts:

Harvard Business Review has published at least three articles on incentive pay and organizational performance in the past decade.  … Each makes a similar point: compensating people for only individual performance creates more problems than it solves, so rewards should emphasize organizational, not just individual, performance. … Not one of these articles refers to the prior article, because HBR precludes footnotes and … discourages references to prior work. (pp.43,44)

James March … put it “Most claims of originality are testimony to ignorance, and most claims of magic are testimony to hubris.” … Knowledge isn’t generated by lone geniuses who magically produce brilliant new ideas in their gigantic brains.  This is a dangerous fiction. … Hackman was troubled because he could only find published success stories about companies that had redesigned work to be more motivating and meaningful.  Yet in his experience most redesign efforts were failing. … a study found no significant performance differences between Peters and Waterman’s “excellent” companies and a representative sample of Fortune 1000 companies.  (pp.46-48)

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  • cournot

    This is an example of inability to deal with endogeneity. Lots of work in IO discusses conditions under which some form of performance pay matters and it makes sense that marginal changes or experiments would on average fail. After all individual rewards DO seem to matter in used car sales or in trading/arbitrage or other related industries. So a blanket statement about incentive pay like this MUST be wrong. The issue is now to qualify the right set of companies that currently do NOT use incentive pay that might potentially benefit from modified incentive pay.

    And it would be interesting to see if incentive pay in academia does in fact lead to more papers (not necessarily better ones) and better department reputation and ranking. The answer seems to be Yes without suggesting that the net outcome (superficial pubs on boring topics) is desirable.

    • http://www.nancybuttons.com Nancy Lebovitz

      The book says that incentives work well if the job doesn’t require cooperation between people who are competing for the incentives, and that relatively few jobs are like that.

  • http://www.rationalmechanisms.com Richard Silliker

    >Knowledge isn’t generated by lone geniuses who magically produce brilliant new ideas in their gigantic brains.

    The lone geniuses produce brilliant new ideas by USING the knowledge available. They also ask THEMSELVES, what I do not know is…… What context am I missing? Though not easily arrived at, the epiphany discloses something simple.

    • http://yudkowsky.net/ Eliezer Yudkowsky

      Citation needed. What has been allegedly shown and how? Is it contradicted by the legend of Einstein, is Einstein’s legend wrong, is Einstein supposed to be a special case, or does this just mean something that doesn’t contradict Einstein’s existence?

      • http://www.rationalmechanisms.com Richard Silliker


      • http://www.rationalmechanisms.com Richard Silliker


        Dictionary: leg·end (lĕj’ənd)


        An unverified story handed down from earlier times, especially one popularly believed to be historical.
        A body or collection of such stories.
        A romanticized or popularized myth of modern times.

        Which legend are you talking about?

      • http://rationalmechanisms.com DWCrmcm

        Rick and I met for coffee earlier this evening during which time he expressed this idea to me. Unless you endorse our lexicon, at least within this context, you won’t understand what he is talking about.
        Because it is through our inchoate model that he arrived at his construction.
        Einstein may be right. I wouldn’t know. What I do know is that Einstein was encapsulating a specific behavior within the context of a Universe comprised of matter. In this context, a minor context, the capacity to measure phenomena is science’s domain. As long as science can rely on Technologically Augmented Perception, science will reside in its own little safe harbor. However beyond TAP, material phenomena, gas, plasma, liquids, and solids, there is only the metaphysical treatment of complexity. Until complexity studies stop toadying to science and math, complexity will remain equivalent to complication.

        In all fairness, the model is taking a while to elucidate, I am told by my psychiatrist and other psychiatrists that my mental illness will make it difficult to elucidate the model for neurological reasons having not to do with any cognitive inability.

        Rather than censoring me as you did and picking on someone who is simply not your intellectual equal, you might want to use that great big brain of yours to get a grip on what we are trying to elucidate.

        I won’t be frequenting your website. Rick may, however as long as we stay off of your site, you may want to show a little respect for someone’s struggle to understand when you are a guest on someone else’s website.

        and Respectfully

        Author and co-developer of RMCM©

      • tim

        You’re both missing Eliezer’s point by a mile. While Einstein (and Newton, and Darwin, and many other brilliant thinkers) did make exceptionally significant contributions to science, his work (and eccentric life) has provided fodder for a mythology surrounding him that denies the labour of his many colleagues who provided the groundwork for his theories and in some cases were working toward, and would have eventually reached, the same conclusions. The lone geniuses are merely geniuses. To suggest Einstein’s theories are Einstein’s alone is to ignore Lorentz, Poincaré, Eddington, Hilbert, Schwarzschild, Friedman, Reissner, Nordström, and everyone else I’m forgetting who contributed to the early theoretical framework, which, we must remember, did not spring fully-formed from Albert’s forehead.

        The idea that brilliant ideas require lone geniuses is an appealing one, not only because we might fancy ourselves such geniuses but also because it provides us with a compelling narrative, but that too is merely a bias we need to overcome. Why else do you think they only exist in the past?

      • http://rationalmechanisms.com DWCrmcm

        While I agree with you somewhat, I will cite Michael Faraday, Emilie du Châtelet , Copernicus, Archimedes of Syracuse, Pythagorus, Buddha, Alexander The Great, Jesus of Nazareth, Norman Bethune, Darwin.

        Why else do you think they only exist in the past?


      • http://www.rationalmechanisms.com Richard Silliker


        a reminder as to what i wrote.

        “The lone geniuses produce brilliant new ideas by USING the knowledge available.”

      • tim

        They aren’t lone geniuses. They are very smart people who built on the natural progression of ideas at the time, and often just so happened to be first. Look at Newton and Leibniz. Were they both “lone geniuses”? No, they were simply two smart men who invented the same thing at the same time because it was the logical thing to be invented at that time. And your example of Darwin is laughable. Haven’t you ever heard of Alfred Russel Wallace, who came up with the same theory as Darwin at the same time as Darwin and was published with Darwin?

        P.S. Norman Bethune? Seriously? The guy who made blood transfusions portable is an example of a “lone genius”? A pretty damn good field surgeon, I’ll grant you, but I don’t think he should share space with Châtelet.

        P.P.S. Your website suggests you have a vested interest in believing in this “lone genius” theory, as it lays out just the kind of crank theory someone wanting to be a “lone genius” likes to espouse. Unfortunately, reality just doesn’t work that way.

      • http://www.rationalmechanisms.com Richard Silliker


        Thanks for your input. Keep coming back.

  • http://bit.ly/45k3ep Andrew

    Oh come on!

    You try running any sales organization without individual performance based compensation and you WILL fail.

    If you don’t understand this, it could be because you haven’t spent enough time in the business world.

    “Causes more problems than it solves.” OK. But if the problem it solves is “making lots more money” and the problems it creates are like “Patty isn’t as happy, because she says Bob closed the deal with a customer she was talking to.” Then I say the number of the problems is less important than the importance.

    • http://www.nancybuttons.com Nancy Lebovitz

      The other problem caused by incentives for used car sales is that customers are apt to feel that they’ve been had, and will try to buy cars some other way if they can.

      Sales incentives are common. I don’t know why used car sales and funeral homes have especially bad reputations, so there may be some products or customary incentive structures which work out worse for customers.

      It could be mostly that products which are rarely bought by a given individual are the problem.

      • http://silasx.blogspot.com Silas Barta

        I don’t know why used car sales … have especially bad reputations

        Have you tried actually going to big used car dealership recently (or even new for that matter)? Were you able to leave without a disgusting taste in your mouth (even if you didn’t buy anything)? The tales of the tricks car salesmen play on customers are legion. And you’re right — they do scare people away from buying more often than they would.

        But I don’t see the problem as being incentive pay, but the extreme variance in the “deal” you can get. If they credibly committed to giving everyone the same deal, no discretion allowed, and had these all openly posted (or at least have a calculator that lets you factor in everything) then you would no more be cheated on a car than you would be on buying a hamburger.

  • josh

    Somebody needs to do “Hard Facts: Research”

  • Biomed Tim

    Is this just a good “contrarian” book, or is it actually a good book? Any of you recommend it?

  • UchicagoMan

    Local minima….

  • Nanonymous

    The more you cite from the book the more likely it seems that it is a collection of half-truths written to make a quick buck.