Posted October 7, 2011 By Presh Talwalkar. Read about me , or email me .

There are proper ways to use incentives to motivate employees. I have written about how incentives can help improve productivity and even reduce employee theft.

Then there are the abysmal incentives that are dreamt up by sadistic bosses. This week there were news reports of a boss who made a contest where employees should guess which person is fired next.

William Ernst, owner of the Iowa convenience stores QC Mart, found a way to earn the title “the boss from hell.” (H/T: Ethics Alarm)

Here is an excerpt of the actual memo he Ernst sent to workers in March:

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"All will be well if you use your mind for your decisions, and mind only your decisions." Since 2007, I have devoted my life to sharing the joy of game theory and mathematics. MindYourDecisions now has over 1,000 free articles with no ads thanks to community support! Help out and get early access to posts with a pledge on Patreon. .

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New Contest – Guess The Next Cashier Who Will Be Fired!!! To win our game, write on a piece of paper the name of the next cashier you believe will be fired. Write their name [the person who will be fired], today’s date, today’s time, and your name. Seal it in an envelope and give it to the manager to put in my envelope. … If the name in your envelope has the right answer, you will win $10 CASH. … Good luck!!!!!!!!!! quoted in the Des Moines Register

To add insult to injury, the game was to be enforced by a set of secret shoppers who were to monitor behavior. You would get fired for infractions like wearing a hat, talking on a cell phone, not wearing the store uniform, or parking your car by the store pumps after hours.

And Big Brother doesn’t stop once they fire someone. After the first contest round, the game starts all over again.

It definitely sounds like William Ernst learned about motivating employees from Glengarry Glen Ross

We’re adding a little something to this month’s sales contest. As you all know, first prize is a Cadillac Eldorado. Anybody want to see second prize? Second prize is a set of steak knives. Third prize is you’re fired.



The backlash from the game

Naturally people were upset about the game and fought back. Several employees expressed their criticism and a few left their jobs. They were not going to put up with a degrading and humiliating game.

The interesting part is the employees then filed for unemployment (story here). William Ernst appealed, saying the workers left voluntarily and were not entitled to the benefits. As I understand it, Ernst was worried because the extra claims count against his record as an employer, so he would have to pay more towards unemployment taxes.

Thankfully for the workers, there are exceptions to the rule. Workers can get unemployment benefits if an employer causes a worker to leave through discrimination or harassment.

This week a judge ruled the workers were entitled for unemployment. The judge called Ernst’s game as “deplorable” as it created a “hostile work environment.”

Ernst lost out big on this game. But hey, maybe he can win the $10 if he guesses that he’s the next one fired.

Extension: the game was a poor motivating tool

Ernst could have greatly benefited by understanding some economics and game theory.

Of course the game is humiliating. But even if you remove that, the rules do not create the proper incentives.

Ranking employees sounds like a good way to motivate people, but in reality, the competitiveness works in unintended ways.

A recent study looked at how “social tournaments” affect employee motivation. Here is what Iwan Barankay, a management professor at the University of Pennsylvania Wharton, says about employee ranking:

Many managers think that giving workers feedback about their performance relative to their peers inspires them to become more competitive — to work harder to catch up, or excel even more. But in fact, the opposite happens. Workers can become complacent and de-motivated. People who rank highly think, ‘I am already number one, so why try harder?’ And people who are far behind can become depressed about their work and give up.

Ernst’s game was a race to the bottom. If he had wanted to remind employees about the rules, he picked one of the worst ways to communicate that.

A simple nudge like having posters with eyes or giving a random reward is a much more effective and more fun way to use a game to encourage employees to follow the rules.