Incentive Gaming

Incentive gaming, or “gaming the system,” refers to when we figure out ways to increase our rewards for performance without actually improving our performance.

Discussion Questions

1. When have you been paid based on your performance, and how did this alter the way you approached your job (for the better and for the worse)?

2. Grades are partly intended to provide incentives for quality work. How do students strategically game grading systems in ways that might pervert this intent?

3. As a manager, what questions should you ask before implementing incentives for your employees?

4. Is gaming unethical, or is it just rationally responding to the incentive system? Whose responsibility is it to stop gaming: the person who designs the incentive system, or the person who exploits it?

5. How do you draw the line between gaming and cheating?

6. What are the long-term implications if students or employees frequently game systems? How might this hurt the way that organizations or society functions? How does this relate to trust?

Case Studies

Gaming the System: The VA Scandal

In the United States, the Veterans Administration (VA) is tasked with, among other things, providing quality health care for U.S. military veterans. Chronically underfunded, the agency was having difficulty providing care in a timely manner. At various locations around the country, veterans were put on lengthy wait lists before they could receive care.

Turning to a common private sector solution in an attempt to reduce wait times, the VA provided bonuses to administrators who could reduce veterans’ wait times for doctor and hospital appointments. While these incentives were meant to spur more efficient and productive health care for veterans, not all administrators complied as intended.

In one hospital, the goal was to reduce wait times to less than 14 days. Clerks would record a wait time of how many days there would be between the first available appointment date and the veteran’s scheduled appointment date, disregarding any days prior to the first available date. In an email to colleagues, the clerk admitted, “Yes, it is gaming the system a bit. But you have to know the rules of the game you are playing, and when we exceed the 14-day measure, the front office gets very upset.”

At some locations, veterans were put on an electronic waiting list. After waiting for up to six weeks to move to the top of that list, they were finally able to call for a doctor’s appointment. If that appointment occurred soon after the call, it was counted as reducing the wait time; the time spent on the preliminary electronic waiting list was not counted. At other locations, VA officials used two sets of books, one recording the real wait times and another recording much shorter wait times that would be used to report success to superiors.

Using these and other maneuvers, executives in the VA qualified for millions of dollars of bonuses, even though actual wait times continued to lengthen. Following an audit of these practices, financial incentives for all Veterans Health Administration executives were suspended for the 2014 fiscal year. As of 2016, investigations remain ongoing.

Discussion Questions

Note that the investigations into the VA are ongoing as of the time of writing. Assuming that the case above accurately reflects what happened, please consider the following questions.

1. In what ways does the VA scandal appear to be an example of incentive gaming? Explain.

2. Do you think performance incentives can be effective and ethical ways of increasing productivity? Why or why not?

3. Whose responsibility is it to stop incentive gaming in the case of the VA: the people who designed the incentive system or the administrators who exploited it? Explain your reasoning.

4. In the case of the VA, how might incentives be structured so that abuses are avoided?

5. Can you think of other examples of incentive gaming that you have seen in the news or in your life? What were the incentives, and how did they result in gaming?

Bibliography

The VA Scandal One Year Later
http://www.forbes.com/sites/adamandrzejewski/2015/05/24/the-va-scandal-one-year-later/

Cheating in the Workplace: An Experimental Study of the Impact of Bonuses and Productivity
http://www.sciencedirect.com/science/article/pii/S0167268113002436

Why Incentives Are Irresistible, Effective, and Likely to Backfire
http://www.fastcompany.com/1140924/why-incentives-are-irresistible-effective-and-likely-backfire

The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software
http://www.journals.uchicago.edu/doi/10.1086/673371

Financial Incentives and Bonus Schemes Can Spell Disaster for Business
https://www.theguardian.com/sustainable-business/financial-incentives-bonus-schemes-lloyds-fine

VA Worker Put on Leave Over Records Foulup
http://www.usatoday.com/story/news/nation/2014/05/09/va-shinseki-veterans-delays-medical/8907417/

Were bonuses tied to VA wait times? Here’s what we know
http://www.cnn.com/2014/05/30/us/va-bonuses-qa/index.html

Something Fishy at the Paralympics

Some of sports’ most inspiring and heart-warming stories have come from the Special Olympics (for athletes with intellectual disabilities) and the Paralympics (for athletes with intellectual impairments and visual or physical disabilities). The Paralympic games are held in parallel with the Olympics every four years and have become a very big deal.  Sports Illustrated reports that “Paralympic sport has grown into big business, with countries and sponsors pouring in millions of dollars to fund and promote athletes whose stories highlight the best of humanity.”[1] Australian Paralympians are sometimes provided “tens of thousands of dollars in government funding and other perks, including college scholarships, vehicles, and housing.”[2] In the 2020 Paralympics, U.S. athletes were slated to receive $37,500 for each gold medal they won.

Unfortunately, sometimes Paralympians cheat much like regular Olympians have been known to do—they take illicit drugs[3] or they drive their blood pressure up (“boosting”) to drive heart rate and improve performance.[4] And, unsurprisingly, the Russians systematically cheat in the Paralympics just as they do in the traditional Olympics.[5] But the most significant cheating involves gaming the International Paralympic Committee’s (IPC’s) classification system.

The IPC classifies the disabilities of competitors in order to provide a structure for competition. Fair competition thrives only if athletes have similar levels of disabilities, so athletes are grouped into classes based on “how much their impairment affects fundamental activities in each specific sport and discipline.”[6]

Obviously, by pretending to have a more serious disability than they actually do, athletes could convince officials to group them with athletes of lesser abilities.  And there is evidence that this has happened.  For example, among the wrongdoing[7]:

  • Swimmers tape their arms for days, removing the tape just before classification. Because of the taping, they are unable to fully extend their arms.
  • Athletes arrive for the classification in a wheelchair when they do not otherwise use wheelchairs, or wearing braces that they normally do not wear.
  • Athletes submerge in cold water or roll in snow soon before classification to worsen muscle tone.
  • Athletes intentionally perform below their ability (“tanking”) in assessment races.
  • Remarkably, even the shortening and removal of limbs has reportedly occurred.

The most infamous example of Paralympic cheating was by Spain’s basketball team at the 2000 Sydney Paralympics: none of the 12 players was mentally disabled as represented.[8] Recently several Paralympians, especially Para-swimmers, have claimed that cheating the classification system is “epidemic.”[9]

After the Spanish basketball team was finally punished in 2017, the IPC removed basketball as a Paralympic sport until officials could prove to the IPC’s satisfaction that they had the classification problem under control.[10]

And, after believable allegations of widespread classification cheating among Australian Paralympians,[11] Australia has launched an online course that is mandatory for all its Paralympic athletes. The course outlines the classification process and requirements for all staff, coaches and athletes, explains penalties for noncompliance, and trains everyone on ethical decision making.[12]

At this time, the 2020 Tokyo Paralympics, along with the 2020 Tokyo Olympics, have been postponed due to the COVID-19 pandemic. Whether or not the increased visibility (and awareness) of Paralympic cheating changes the way these games are played in the future remains to be seen.

Discussion Questions

  1. Are you surprised to learn that some of these inspiring Paralympians are cheating? Why or why not?
  2. Why do you think some Paralympians cheat?
  3. What psychological biases, social pressures or rationalizations might these athletes employ to support their decision to cheat? Explain.
  4. Why do we seem to have cheating in the Paralympics, but not the Special Olympics?
    1. Can the video on “incentive gaming” shed some light on this question?
  5. The coach who recruited the 2000 Spanish Paralympic basketball team has reportedly built a fortune by collecting state money aimed to support disabled athletes.[13] Does the self-serving bias play a role in motivating cheating? How so? By the coaches? By the athletes? Explain.
  6. It has been reported that the consciences of the 12 non-disabled semi-professional Spanish basketball players who entered the Sydney Paralympics of 2000 (and won the gold medal) were eased by the President of Spain’s Federation for Mentally Disabled Sports. He told them that fake Paralympians were commonplace in every sport at the Paralympics.[14] Does this sound like the conformity bias in action? Why or why not?
    1. Is this assertion defensible intellectually, or is it just a massive rationalization?
  7. It has been suggested that cheating by athletes in the Paralympics reinforces a stereotype held by many that people often pretend to be disabled in order to qualify for government payments and are therefore cheats?[15] Is reinforcement of this false narrative a damaging result of the cheating scandal? Why or why not?
    1.  Do you think this negative outcome was foreseen by the wrongdoers?
    2. Can you think of other collateral impacts?
  8. It has been argued that because the Paralympics are about winning (just like all sports) and that sometimes people in other sports cheat, it is no big deal that Paralympians cheat. Indeed, “[s]ome Paralympians and disability-rights speakers take doping scandals as positive news. They say it proves disabled people can achieve the same things as anyone else, including cheating. People, they argue, can identify more with a role model who has made mistakes.”[16] Do you find this a convincing argument? Explain.
  9. Paralympian gold medal winner Bethany Woodward gave back her gold medal in the relays because one of her teammates was insufficiently disabled and therefore gave her team an unfair advantage. Woodward said, “Paralympic sport is about disabled people pushing themselves and overcoming their disability. Handing back this medal will mean all the medals I won are to do with me, my cerebral palsy and my strength.”[17] This act has been mocked by Jim Moore, who wrote: “Para sport is either about inspiration porn, and giving ‘special people’ a little something to do in between putting us all back in a box. Or it’s about what all other sport is about: winning.”[18] Do you agree with Moore? Do you admire Woodward? Both? Neither? Support your position.
  10. Athletes like Bethany Woodward and U.S. Para-swimmer Jessica Long have been trying to call attention to cheating in the Paralympics. But they have been criticized by fellow Para-athletes for causing a furor that threatens to tear the sport apart and thereby damage it irrevocably.[19] Some think that Woodward and Long should just shut up. Do you? Why or why not?
  11. Are the steps being taken by the IPC (banning basketball until the sport can clean up its act) and individual countries like Australia (with its online training course) necessary? Are they sufficient? Explain your reasoning.

Bibliography

[1] Robert Sanchez, Dirty Pool at the Paralympics, Sports Illustrated, March 2020, at https://www.si.com/olympics/2020/03/03/paralympiccheating.

[2] Robert Sanchez, Dirty Pool at the Paralympics, Sports Illustrated, March 2020, at https://www.si.com/olympics/2020/03/03/paralympiccheating.

[3] Roger Collier, Most Paralympians Inspire, But Others Cheat, Canadian Medical Association Journal, Sept. 9, 2008, at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2527388/.

[4] Kevin Carpenter, The Dark Side of the Paralympics: Cheating Through “Boosting,” LawInSport, Aug. 27, 2012, at https://www.lawinsport.com/more/blogs/kevin-carpenter/item/the-dark-side-of-the-paralympics-cheating-through-boosting.

[5] Rebecca Ruiz, Russia Is Banned from Paralympics, Again, for Doping, New York Times, Jan. 29, 2018, at https://www.nytimes.com/2018/01/29/sports/paralympics-russia-doping.html.

[6] International Paralympic Committee, November 2015 IPC Athlete Classification Code (2015).

[7] Robert Sanchez, Dirty Pool at the Paralympics, Sports Illustrated, March 2020, at https://www.si.com/olympics/2020/03/03/paralympiccheating.

[8] Simon Tomlinson, Are These the Biggest Cheats in Sporting History? Staggering Story of the Healthy Spanish Basketball Team Who Pretended to Be Mentally Handicapped to Win Paralympic Gold, The Daily Mail, Oct. 14, 2013, at https://www.dailymail.co.uk/news/article-2458715/Spanish-basketball-team-pretended-disabled-win-Paralympic-gold.html

[9] Robert Sanchez, Dirty Pool at the Paralympics, Sports Illustrated, March 2020, at https://www.si.com/olympics/2020/03/03/paralympiccheating.

[10] Craig Lord, Jessica Long on the Poison Pool in Paralympic Swimming Where ‘Classification Cheats Prosper,’ Swimming World Magazine, March 5, 2020, at https://www.swimmingworldmagazine.com/news/jessica-long-on-the-poison-pool-in-paralympic-swimming-where-classification-cheats-prosper/.

[11] Scot Spits, Misrepresenting Disability on a Par with Doping: Paralympics, Australia, Sydney Morning Herald, July 31, 2019, at https://www.smh.com.au/sport/misrepresenting-disability-on-a-par-with-doping-paralympics-australia-20190731-p52cm2.html.

[12] Chris Dutton, Paralympics Australia Launches Crackdown on Cheats, Canberra Times, May 29, 2019, at https://www.canberratimes.com.au/story/6188557/para-sport-launch-cheating-crackdown/#gsc.tab=0.

[13] Alex Dunham, ‘Stop Playing Well, They’ll Know You’re Not Disabled,’ The Local, Oct. 11, 2013, at https://www.thelocal.es/20131011/stop-playing-well-theyll-know-youre-not-disabled.

[14] Alex Dunham, ‘Stop Playing Well, They’ll Know You’re Not Disabled,’ The Local, Oct. 11, 2013, at https://www.thelocal.es/20131011/stop-playing-well-theyll-know-youre-not-disabled.

[15] James Moore, The Paralympics Cheating Scandal Proves that British Para-sport is a Victim of Its Own Success, The Independent, Oct. 31, 2017, at https://www.independent.co.uk/voices/paralympics-cheating-scandal-british-athletes-success-disabilities-classification-a8029866.html.

[16] BBC, Paralympics: Olympic Implications, at http://www.bbc.co.uk/ethics/sport/aspects/paralympics.shtml.

[17] Paul Grant, ‘I’m Handing Back My Medal’: Is Paralympic Sport Classification Fit for Purpose?, BBC.com, Sept. 18, 2017, at https://www.bbc.com/sport/disability-sport/41253174.

[18] James Moore, Why is Anyone Shocked that Paralympians Have Been Accused of Cheating?, The Independent, Sept. 23, 2017, at https://www.independent.co.uk/voices/paralympics-para-athletes-doping-cheating-classification-paralympians-a7962796.html.

[19] Robert Sanchez, Dirty Pool at the Paralympics, Sports Illustrated, March 2020, at https://www.si.com/olympics/2020/03/03/paralympiccheating.

Teaching Notes

This video introduces the behavioral ethics bias known as incentive gaming. Incentive gaming, or “gaming the system,” occurs when we figure out ways to increase our rewards for performance without actually improving our performance.

To learn about a related behavioral ethics concept that also covers issues of risk and reward, watch Loss Aversion. To learn about ways to encourage ethical workplaces and avoid incentive gaming, watch Ethical Leadership, Part 2: Best Practices.

The case study on this page, “Gaming the System: The VA Scandal,” describes how incentives that were meant to spur more efficient and productive healthcare for veterans did not have the desired outcome. For a related case study about an investment banker who took big risks to try to game his way out of major losses, read “The Collapse of Barings Bank.”

Terms defined in our ethics glossary that are related to the video and case studies include: conflict of interest, diffusion of responsibility, loss aversion, and self-serving bias.

Behavioral ethics draws upon behavioral psychology, cognitive science, evolutionary biology, and related disciplines to determine how and why people make the ethical and unethical decisions that they do. Much behavioral ethics research addresses the question of why good people do bad things. Many behavioral ethics concepts are explored in detail in Concepts Unwrapped, as well as in the video case study In It to Win: The Jack Abramoff Story. Anyone who watches all (or even a good part) of these videos will have a solid introduction to behavioral ethics.

Additional Resources

The latest teaching resource from Ethics Unwrapped is an article, written by Cara Biasucci and Robert Prentice, that describes the basics of behavioral ethics, introduces the videos and supporting materials along with teaching examples, and includes data on the efficacy of Ethics Unwrapped for improving ethics pedagogy across disciplines. It was published in Journal of Business Law and Ethics Pedagogy (Vol. 1, August 2018), and can be downloaded here: “Teaching Behavioral Ethics (Using “Ethics Unwrapped” Videos and Educational Materials).”

For more resources on teaching behavioral ethics, an article written by Ethics Unwrapped authors Minette Drumwright, Robert Prentice, and Cara Biasucci introduces key concepts in behavioral ethics and approaches to effective ethics instruction—including sample classroom assignments. The article, published in the Decision Sciences Journal of Innovative Education, may be downloaded here: “Behavioral Ethics and Teaching Ethical Decision Making

A detailed article by Robert Prentice with extensive resources for teaching behavioral ethics, published in Journal of Legal Studies Education, may be downloaded here: “Teaching Behavioral Ethics

An article by Robert Prentice discussing how behavioral ethics can improve the ethicality of human decision-making, published in the Notre Dame Journal of Law, Ethics & Public Policy, may be downloaded here: “Behavioral Ethics: Can It Help Lawyers (And Others) Be their Best Selves?”

A dated but still serviceable introductory article about teaching behavioral ethics can be accessed through Google Scholar by searching: Prentice, Robert A. 2004. “Teaching Ethics, Heuristics, and Biases.” Journal of Business Ethics Education 1 (1): 57-74.

Transcript of Narration

Written and Narrated by

Lamar Pierce, Ph.D., M.S.
Department of Organization and Strategy
Olin Business School
Washington University in St. Louis

“Organizations and institutions frequently use financial incentives to motivate productive behavior. Majority of people dislike effort to some degree, which forces authorities to either monitor people intensely to ensure that they contribute, or to pay them based on their observable performance. Salespeople are given commissions, bankers are given bonuses, and even teachers are paid for student performance.

The problem with these incentives, of course, is that you need to decide on which metrics to base the incentives, and then communicate those rules to people in order to motivate their performance. You can only pay people based on what you observe, and you cannot observe everything – which is why we get incentive gaming.

Incentive gaming is when people manipulate pay-for-performance schemes in ways that increase their compensation without benefiting the party that pays. Often referred to as “rewarding A while hoping for B,” incentive gaming is an example of how opportunistic and strategic people can be when there are financial rewards involved. People will focus all their effort on those incentives that pay them the best, and will even manipulate information to represent their performance on those dimensions as higher than it actually is.

The financial crisis of 2008 provided several excellent examples of incentive gaming. Some mortgage brokers, who were paid commissions for originating mortgages, quickly learned they could earn more money if they relaxed the credit requirements for homebuyers. They were compensated based on originating a loan, not on whether that loan defaulted in subsequent years, a costly outcome for the bank and homeowner. The incentives designed to motivate effort and entrepreneurial behavior also motivate people to increase their earnings in ways that hurt both their customers and market efficiency.

Examples of incentive gaming are everywhere. When teachers are paid based on the standardized test performance of their students, they focus much of their effort on teaching to the test and hurt student education. When salespeople are given bonuses for reaching monthly sales targets, they offer customers unnecessary discounts to buy now rather than later. When workers are paid based on their relative rankings, they may focus their effort on sabotaging their coworker instead of improving their own performance.

The implication of incentive gaming is that managers and policy-makers need to understand that humans are clever and opportunistic beings. If you give them an incentive system, many of them will figure out how to manipulate it to maximize pay and minimize effort. Designers of incentive-based compensation systems must think carefully about unintended consequences, putting themselves in the shoes of their employees, and ask, “If I were given these incentives, what might I do to game them?””

 

Shares