“This has nothing to do with bonuses,” Dean protested.

“As I look at these goals, each attached to a bonus, every team has an internal goal, based on some efficiency. The highest efficiency for each team can best be achieved by ignoring the goals of the other teams.

“Here is the central question,” I continued. “Do you think the company can be most effective by making each of its internal departments most efficient?”

“Well, yeah,” Dean replied.

“It seems counterintuitive, but for the company to be most effective, some of the departments may have to be less efficient.”

Dean looked puzzled.

“Look, Dean, of your four departments, which is the slowest, the department that everyone has to wait for?”

Dean looked at a chart with his four teams. Red, blue, green and orange. “It’s the green team. They’re the bottleneck. We would put more resources in there, but they are too expensive. We just do the best we can.”

“And when everyone is focused on their own stuff and not paying attention to the green team, what happens?”

“Well, the blue team feeds them work. But the blue team works most efficiently in batches, so they feed zero work for two days, then dump a bunch of work on the green team at the same time. The green team can only work so fast, so everything stacks up there and everything goes late.”

“So, why doesn’t the blue team work in smaller batches and feed work sooner?” I asked.

“Well, if the blue team works in smaller batches, they can’t produce enough to make their goal. And their goal is tied to their bonus.”

“So, you have a bonus problem.” -TF