Sunday’s New York Times had a fascinating article about (American) football entitled Coaches Take More Risks, But Perhaps Not Enough.
I’ve always believed that business managers are too conservative for two reasons:
- They are rewarded for plan performance, not absolute performance. (See Beyond Budgeting for more on this whole meme.)
- They seek to avoid looking stupid as a primary motivation
To make this concrete, at BusinessObjects I’d often ask myself who (hypothetically) was the better manager:
- The guy who ran Italy, who signed up for 75% growth and delivered 69%
- The guy who ran France, who signed up for 25% growth and delivered 30%
In the vast majority of corporate reward systems, Mr. France is the winner. In fact, if Mr. Italy’s not careful, he risks not only looking stupid but quite possibly getting fired — all for delivering double the growth of Mr. France.
I was, however, stunned to realize that the same kind of thing happens in professional athletics. If there ever were an endeavor where getting-the-win should matter more than looking-dumb, you’d think it would be professional sports. But it’s not so:
“Coaches are primarily conservative by nature,” Fouts said. “They don’t want to lose their jobs because they made a stupid decision. They are making a lot of money.”
Perhaps coaches are paid on a bad compensation plan, I wondered, one that doesn’t properly incent winning. But it seems deeper than that. A related story, Mr. Fourth And Go For It, details the work done by a UC Berkeley economist, David H. Romer, prompted by listening to a Raiders game many years ago:
[Romer] came up with the idea to rigorously examine fourth-down plays after listening to a radio broadcast of an Oakland Raiders game in his car about a decade ago. Although the Raiders had the ball in striking distance of the end zone, one of the commentators remarked that they would be smarter to kick a near-certain field goal rather risk going for a touchdown.
“I am pretty analytic,” Romer recalled telling himself. “That is a pretty shallow way of thinking about it.”
His work suggests that on fourth-down plays coaches are actually more motivated by perceived-stupidity-avoidance than by winning. All this in a highly competitive sport with absolutely clear winners and losers and stakes that run in the tens of millions of dollars. But here’s a typical — and funny — response to Romer’s work from a member of the football establishment:
If you can’t get football coaches to take intelligent risks, does a business executive even have a chance to get his/her managers to take them?
This should make us all stop and think about how and when our organizations can make people look stupid, how to change that, and how to properly reward risk-taking, tolerate mistakes, and provide a culture in which people feel it’s a safe place to innovate.