Wednesday, October 11, 2006

Upside-down incentives

There’s nothing wrong with tying pay to performance, as the Boston Globe proposes to do in its newsroom. But the newspaper’s proposed incentive program appears to be unclear on the concept.

As reported by Editor and Publisher, the Globe wants to make future newsroom raises contingent on increases in the newspaper’s revenues. If revenues for the print product go up by a sufficient amount, the newsroom wins. If they don’t, then it will be tough noogies for the newsies.

Economic incentives have proven their value since the dawn of capitalism. They work equally well for migrant agricultural workers and chief executives, with the exception that farm laborers don’t have the same opportunity as CEOs to tweak the program when there isn't enough low-hanging fruit.

The problem with the Globe’s plan is that it ties pay to performance that the newsroom can’t possibly influence, unless reporters are to be issued order pads so they can start selling ads. If sales falter through no fault of the newsroom, the resulting payday blues conceivably could translate into less enthusiasm, lower quality and a less compelling product.

The greatest irony in the proposed Globe plan is that pay incentives are tied only to print sales, even as the newspaper, like most others, is mounting a major strategic initiative to build its digital media business.

While the Globe will require journalists to make greater contributions to its new media activities as a condition of their employment, there oddly are no positive economic incentives to encourage extra effort. (UPDATE 10.13.06: In contrast to the Globe's approach, Business 2.0 is encouraging staff members to create blogs and compensating them for their efforts based on the amount of traffic they generate.)

The Globe undoubtedly is counting on the professional pride of its newsroom to sustain the quality of the product, regardless of the idiosyncracies of compensation program.

To successfully transform itself as a serious competitor in the digital age, however, the Globe, like all news organizations, will need to attract and retain the strongest, most creative journalists it can get. An upside-down incentive program isn't going to help.

Managers should remember that incentives cut both ways. And negative ones cut the deepest of all.