System Traps: Rule Beating
Date: 2011-05-14 21:02:54

In 'http://www.amazon.com/Thinking-Systems-Donella-H-Meadows/dp/1603580557[Thinking In Systems]' section five focuses on systems which produce "truly problematic behaviour" and one of these so called system traps is known as 'rule beating'.

Rule beating occurs when the agents in a system take evasive action to get around the intent of rules in a system:

____
The letter of the law is met, the spirit of the law is not.
____

A common system where we see this in organisations is around training budgets.

Each individual will be given a certain amount of money to spend each year and if they don't spend it then they lose it.

The tendency, therefore, is for people to ensure that they spend their budget even if it's on a training course that they might not have otherwise been interested in.

In a way they are http://qconlondon.com/dl/qcon-london-2011/slides/LizKeogh_LearningAndPerverseIncentivesTheEvilHat.pdf[gaming the system].

As I understand it, the system was originally designed this way because the organisation wants to have a predictable cash flow for the year.

In a 200 person organisation where each person is given £2,000 to spend, that amounts to £400,000 over a 12 month period.

If the majority of people decided to not spend their training budget during one year and all decided to use it the next year then the organisation would lose the ability to predict cash flow accurately.

There could be £100,000 being spent on training one year and then £700,000 the next which could result in the organisation having to borrow money from the bank in order to cover it.

In this case it's not really a big system problem but the system doesn't encourage to people to act in a way which is in their interests or the organisation's.

If a person doesn't feel the need to spend the budget one year but then suddenly gets really interested in a topic and wants to attend some conferences on it then they won't be able to under the year by year system.

As an aside when http://www.thekua.com/atwork[Pat] and I were discussing this system I was curious why not every agent in the system would behave in the way that the system seems to encourage i.e. some people won't spend the training budget just for the sake of it.

Pat pointed out that this is why Deming said 95% of the problems are caused by the system and not 100% - there is still space for the individual to behave differently regardless of the system they're in.

I understand the logic but don't do that particular thing myself but I do make sure that I take all my vacation time each year because that also doesn't roll over!

At XP 2011 Brian Marick spoke about http://en.wikipedia.org/wiki/Gift_economy[gift based] and transaction based economies. At the moment the training budget would be the latter but Pat suggested it would be interesting to see if the former approach would work better.

If that approach was followed then it would be more trust based i.e. people would be trusted to use the 'gift' of training however they saw fit without the need for a rule restricting how/when they could do so.

There would of course need to be some sort of checks/measurements in place to ensure that people didn't abuse the system.

In the book http://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553/ref=sr_1_4?ie=UTF8&qid=1305405545&sr=8-4[Maverick] Ricardo Semler suggested that only 3% of people would be problematic and you could then deal with those people instead of putting rules in place for everyone.

I would be really interested to see whether a trust based system would actually work but I guess it's probably considered a bit of a risk for an organisation to try it out.