Bonuses role in the financial melt-down March 16, 2009
Posted by Paul Duignan in : Accountability, Indicators, Measurement, Outcomes models, Outcomes theory, Outcomes theory & politics, Outcomes theory & the news, Reporting systems , add a commentPresident Obama has amplified the attack on bonuses being paid to staff in companies which have been bailed out by the U.S. government (CNN, 16 March 2009). What does outcomes theory have to say about the role of the bonus system in the current financial meltdown? I blogged in 2007 about the problem of bonuses in the financial system and how it was possible the full extent of the melt-down would take time to be revealled. Thinking in terms of an outcomes model, what has happened is that financial institutions should have been aiming (as they do in healthy times) at the overall outcome of Sustainable long-run profitability. (more…)
14 years for revealing an indicator! February 8, 2009
Posted by Paul Duignan in : Indicators, Outcomes theory & politics, Outcomes theory & the news , 1 comment so farOne of the principles of outcomes theory is that if you want groups of stakeholders to not have a complete understanding of what is happening as an outcomes model plays out, you try to suppress information about indicators of outcomes which are heading in the wrong direction. There is currently a story in the media about a UK officer being arrested in Afghanistan for allegedly supplying civilian casualty figures to a human rights campaigner. The CNN story is here.
Developing a comprehensive sector visual outcomes model January 20, 2009
Posted by Paul Duignan in : Communicating outcomes models, DoView, Easy Outcomes, Indicators, Outcomes models, Reporting systems, Uncategorized , 2comments
In earlier blog postings I’ve talked about the use of large scale outcomes models for various purposes such as overall policy development, evidence-based practice and monitoring and evaluation. The next version of DoView outcomes and evaluation software [[Disclosure: I am involved in the development of DoView] is going to allow images to be included in DoView files and in the web page models which can be created within DoView and then put up on the web. A mock-up of what parts of a visual sector plan using the upcoming version of DoView could look like is available. This will be a no cost update to DoView which is planned for release in February 2009.
More on politicians – accountability (praise and blame) and having ‘blown it’ December 10, 2008
Posted by Paul Duignan in : Accountability, Evaluation debates, Indicators, Outcomes systems architecture, Outcomes theory, Outcomes theory & the news, Reporting systems , add a comment
Further to my last posting on whether or not the jump in President Bush’s approval rating was attributable to him (i.e. provable that he caused most of it, rather than it just being the fact that he happened to find himself being President on September 11th), I came across a letter to Newsweek which relates to another aspect of the features of steps and outcomes in outcomes models as related to politicians. (The letter is the second letter listed here). This time it is the issue of accountability. (more…)
Attibution and President Bush’s approval rating December 7, 2008
Posted by Paul Duignan in : Accountability, Attribution, Impact evaluation, Indicators, Measurement, Outcomes systems architecture, Outcomes theory & the news, Reporting systems , add a comment
I’ve been doing a lot of thinking about indicators and attribution these days. I think that a lot of problems (particularly misinterpretations of how well or badly parties are doing within outcomes systems of all types arise because of confusion between attributable and not-necessarily attributable indicators. The underying Five Building Blocks Diagram which is used in outcomes theory makes a distiction between attributable and not-necessarily attributable indicators.The Washington Post today had an interactive showing President Bush’s Approval Rating over time. At various points, the graph had labels showing what was happening at the time, presumably to help the reader work out why his rating went up and down at the points it did. The biggest jump was around September 11 where his approval took a massive leap from something like 56% to 92% (reading off the graph). Below is a section from the interactive. (more…)
Sharing the pain – crazy indicators, targets and funder reporting systems December 4, 2008
Posted by Paul Duignan in : Accountability, Doing evaluation more efficiently, DoView, Easy Outcomes, Indicators, Measurement, Outcomes systems architecture, Reporting systems, Using the approach , add a comment
This blog post is a follow-up to an earlier posting on my blog. In a comment on that posting, M&Egirl outlined problems she was having with a funder demanding targets that are meaningless and asked for more comment on this obsession with targets on the part of funders.
The program she is working on is a Gender Related Violence program, which for the sake of this discussion I’ll presume involves women who have been subject to gender related violence receiving some sort of intervention to help them be safe and move beyond the trauma they have suffered. Because the issue of indicators and targets is such an important issue I thought that I’d do a further posting on it. If you have a moment, have a quick read of the original posting and M&Egirl’s comment before reading this blog posting. (more…)
Indicators, targets, benchmarks – sorting out the terminology November 27, 2007
Posted by Paul Duignan in : Indicators, Measurement, Outcomes systems architecture, Outcomes theory, Using the approach , 2commentsMany different terms are used in the outcomes and performance management area for measurement and indicators. Often there is considerable confusion about these terms. The short definitions I use from outcomes theory are:
- Outcomes – causes or effects in the real world. Whether or not such causes can be measured is a separate issue (see previous blog for features of outcomes)
- Steps - lower level causes which lead to higher-level outcomes. Because causal processes reside in causal hierarchies, outcomes at one level can be steps for achieving even higher-level outcomes, therefore to refer to causes and effects at any level the general term ‘outcomes and steps’ is used.
- Measurements – measure whether or not an outcome or step has occurred (or how much of it has occurred).
- Indicator – a measurement of an outcome or step.
- Target - a level on an indicator.
- Benchmark – levels on indicators already achieved by other players, or by the same player at an earlier time or in another setting.
- Priorities - an outcome or step which is thought to be the most important for a player to focus their efforts on changing.
Indicator Problems stressing out US Patent Office examiners October 22, 2007
Posted by Paul Duignan in : Indicators, Outcomes theory , add a comment
In an earlier blog posting on the banking system, I commented on the problems associated with indicators which can be distorted by employees. You can either use such indicators to get an accurate measure of an outcome or use them for incentivizing employees, but not both. Of course, if they’re being distorted by employess to maximize their bonuses, then the wrong types of behavior are probably being incentivized. A different problem can arise in those situations where it much harder to distort indicators. These situations in which it’s relatively easy to independently verify indicators are described in the social sciences as being situations where such indicators are reliable. However, indicators need to not only be reliable, they also need to be valid – they need to actually measure what they claim to measure. The US Patent and Trademark Office is having indicator problems of this second type with their production quotas. According to a Washington Post article their production quotas have not been adjusted since 1976 and modern patents are more compex and therefore take more time to process. As a result 67% of staff see production quotas as among the top reasons they would consider leaving and the office has a turnover crisis according to the General Accounting Office. (more…)
Trading-off indicator accuracy for incentivization – forecast calls for pain October 3, 2007
Posted by Paul Duignan in : Indicators, Outcomes theory & the news , 2comments
An article in the London Times today (4 October 2007) – Why a bulging bonus is part of the problem, argues that the current credit crisis following the melt-down of the US mortgage markets has not yet run its full course. In particular, the problem is that in the global banking system, ‘the losers do not know that they are losers, even now’. It will only be when banks start selling off their investment assets that the real price of these assets will be determined and at that time there’ll be lots more pain. In the meantime, it’s likely that a falsely positive picture will be painted because of the bonus systems for employees in the banking industry. This system means that ‘there is tremendous incentive for everyone from the chief executive down to believe the best when millions in personal rewards are at stake’. As a result they’ll overvalue banks assets in the short term. In the run up to the crisis, the first half year results for banks were the best they’ve ever achieved. In order for employees to get an annual bonus they’ll need to also show good results in the second half of the year or else they’ll lose the potential bonus they have on the books from first half of the year.
This is a classic example of the outcomes theory principle of the trade-off between indicator accuracy and using indicators for incentivization where indicators are easy to falsify. And ‘it is the very nature of the bonus system that may end up prolonging the agony’. Perhaps we could go even further than the article and wonder about the roll of the bonus system not only in prolonging the agony, but as a contributing factor in the creation of the problem in the first place. (more…)