One of my recent favorite books is "Drive" by Daniel Pink -- a must-read in my view. Pink writes about what motivates us, and many of the answers will surprise you. One critical conclusion: customary so-called "if-then" rewards (i.e., if you do this, you get this) not only sub-optimize performance, but more disturbingly also can directly lead to unethical behavior.
Case in point: the sad story of Dell just reported in today's Wall Street Journal. In this case, the absolute unfiltered drive to meet and beat quarterly financial targets -- and thus steadily increase its stock price -- led to a 4 year period that the SEC concludes amounted to ongoing accounting fraud.
Specifically, The Wall Street Journal reports that Dell -- during the years 2002-2006 -- improperly hid massive payments from Intel in an attempt to inflate earnings and mislead investors into thinking that its direct sales strategy and production efficiencies led to its success. Without admitting guilt, Dell has agreed to pay a $100 million fine.
According to the SEC's complaint, without Intel's payments, "Dell would have missed Wall Street analysts' profit estimates in every fiscal quarter from 2002 to 2006." The SEC's complaint cites, among other things, that Intel payments "amounted to more than $720 million, or 76%, of Dell's operating profit" in the first quarter of the 2007 fiscal year.
This sad chapter should give everyone running a business (including boards of directors) pause -- it is a cautionary tale. "Think Pink" (as in Daniel Pink) and read his book "Drive." Long-run performance and success are what it's all about. Ask yourself -- do the ever-growing obsession with -- and pressures of -- meeting and beating quarterly numbers lead to the results you want? Or, do those pressures instead cause questionable short-cuts -- and, worse, unethical behavior (including, in some cases, outright fraud)?