Stop Incentivizing “Productivity Theater” at Work

Sometime during the British Raj, the population of cobras in Delhi got out of control. The British government became concerned about the danger posed by the venomous snakes and decided to offer a bounty for cobra skins. They thought by offering a reward for dead cobras, the public would solve the snake infestation problem themselves.

At first, the new policy worked well. Large numbers of snakes were hunted down and killed for the reward. But the bounty also created an opportunity for profit among some enterprising people, who began to breed cobras so there would be more snakes to kill. 

Here’s where the real problems emerged. When the government eventually got wise to the situation, the reward program was canceled. With no bounties to collect, cobra breeders set their now-worthless snakes free, making the infestation even worse than before.

The cobra story¹ is one of perverse incentives: incentives that unintentionally reward undesirable behaviors. It’s also the namesake of the so-called “cobra effect,” coined by Horst Siebert, which describes cases where people are actually incentivized to behave in a way that makes the problem at hand worse.

As the cobra story demonstrates, implementing policies without fully understanding their implications, and without monitoring their progress, can be disastrous. It also goes to show that measuring the wrong outputs (in this case, the number of dead cobras a person could produce) or neglecting potential risks (the appearance of enterprising breeders) may well backfire. Moreover, it serves to highlight the importance of thinking through and testing solutions before taking full-scale action.

Perverse incentives can ruin the best-laid plans of bureaucrats and businesspeople. And in the world of hybrid work, they’ve become more relevant than ever.