The Cobra Effect 

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The Cobra Effect 

No, I’m not talking about COBRA, the law that allows employees to extend their insurance coverage after separation.  I’m actually talking about the snake, the cobra.  “The Cobra Effect” is a nickname for any worst-case-scenario involving the “Law of Unintended Consequences.”

Susan LeMiles Holmes
Susan LeMiles Holmes

During India’s colonial days, the British decided to exterminate the venomous cobra by offering a bounty.  “Bring us dead cobras and we will give you cash.”  Problem solved.  But the enterprising locals saw things differently.  To them, it looked like a clear reason to start breeding snakes in order to make more money.  They were quite successful.

What happened when the smug problem-solvers discovered the flaw in their plan?  They stopped offering the bounty, of course.  What happened when the snake bounty was no longer available?  The citizenry of India set their farmed, but now worthless cobras free … all of them.

The Cobra Effect is a solution to a problem that actually makes the whole thing a lot worse.  I suppose it is sort of a second cousin to Murphy’s Law.  “Anything that can go wrong will go wrong.”  Similar situations have occurred in organizations all over the planet, including the U.S.

As a benefit, one company provided leased cars and gas credit cards for employees.  The company placed no restrictions on private use on weekends and holidays.  When gas prices skyrocketed, and the company wanted employees to cut back on their driving, they published a graph of the number of miles driven by each employee (without names).  They assumed that workers with unusually high numbers would feel ashamed and reduce their use of the leased car.

But the reaction was unexpected and completely opposite.  Workers saw that there were others who traveled much more than they did; and they started using their leased cars even more.  The Cobra Effect.

When the good intentions of the U.S. government led regulators to put controls on how much money executives on Wall Street should make in bonuses, the voters smiled.  In an attempt to recruit and retain the “heavy hitters,” companies simply started offering higher base salaries.

Remember, base salaries, especially for executives and sales people, are guaranteed regardless of performance.  They are counter-intuitive to the concepts of a performance-driven culture.  The Cobra.  Success in performance-driven compensation plans should be measured on the quality of work, in combination with quantity produced.  The compensation formula should prevent payment of bonuses or commissions if the transaction could possibly be compromised later.

To read more of this story by Susan LeMiles Holmes , read the November 2014 edition of VBR under the “Current & Past Issues” tab on this website, or pick up a copy on news stands. 

 

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