Monday, September 13, 2010

Paying More for Less: Understanding the Correlation between Big Payment and Work Performance

About a year ago, I wrote a short article on whether there is any relationship between guaranteed high bonus and excessive risk taking by the management of a company. You can see the post here. Basically, such guaranteed high bonus gives a negative incentive to the board of directors to take higher risks in order to gain better benefit for the company. While higher risks might be translated into higher profits, they can also cause higher costs and losses which would trouble the company and the shareholders. In other words, big payment might actually produce worse results.

Apparently, Dan Ariely, a Professor of Psychology and Behavioral Economics at Duke University, has a similar view on this issue, though he reached the conclusion from different perspective. In his latest book, The Upside of Irrationality, he discusses his experiment which more or less shows that higher payment does not always work. The experiment was conducted in India, where several participants were asked to play some games in which they will receive financial compensation if they completed certain objectives within the games. The tests were divided randomly into 3 categories (the games were same, though), the first category gave very small payment (equal to payment for 1 working day in India), the second category gave mediocre payment (equal to payment for 1 week of work), and the third category provide the highest payment (equal to payment for 5 months of work). FYI, the average costs of one month living in India is US$11, so 5 months means US$55. That's why Dan had enough funds to conduct his research :).

What's the result of the experiment? Well, you might have guessed this: statistically, those who play the games in the third category end up as the worse players. It seems that the thought of having such a huge payment in the end of the game gave them a huge pressure, so huge that most of them fell under the mental pressure. This is interesting and yes, I can relate this to myself. As an example, when I do online shares trading, the bigger the stake is, the harder I make the final decision. It is a very stressful experience! The case is different when the stake is low, and I definitely can make a better decision in such case.

Therefore, it is quite easy for me to understand the result of the above experiment. When you know that the stake is very high (i.e. the end rewards), there is always a possibility that you will fall under the pressure which eventually will affect your overall performance. The similar thing can happen to those CEOs who are promised with guaranteed big fat bonuses. Since they need to establish a sufficient evidence that they are worthy enough to receive such payment, they take actions that might be riskier which then turn out to be a deep trouble for the company. Hence, lower performance.

I must say that Dan Ariely experiments entertain me most of the time. Like it or not, men are not always rational. There are certain conditions where our rationality might be defeated by our impulse. Only by accepting this fact that we can actually improve ourselves from such weakness. For more information, I suggest you to quickly buy the book. It's available in Times, as far as I know.

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Monday, September 06, 2010

Tweet Series: My Rants on Lawyering

I've been twittering for some time and realized that Twitter is a really bad choice for storing your thoughts. So, in order to preserve some of my ideas there, I will post my tweets collection from time to time here, starting with my Lawyering Tweet Series. Enjoy :)
  1. As a lawyer, you can be as smart as possible, but if you can't get the deal done, you're useless. As simple as that.
  2. A partner said that lawyers should have high sense of client belonging. Well, if I get the client credit, I'll treat them as family!
  3. To move to the next level, lawyers should never forget to do good marketing, since partnerships are offered to rain makers.
  4. So we're having a session on being a Happy, Healthy and Ethical Lawyer. I tell you one thing. Stop the crap, and pay us more. Case closed.
  5. Lawyers will never get a balanced life from some trainings, but from proper work distribution and efficient working system.
  6. If you're a good lawyer, client will trust you no matter what. Appearance sure helps, but only for the first meeting.
  7. Any good lawyer knows that the purpose of contract drafting is to reduce or even eliminate any potential dispute, not to create one.
  8. It is a tragedy that qualified lawyers who understand the law must work under laws made by unqualified people.
  9. What is the joy of becoming the best lawyer in town if you are merely a spokesperson of some bad and stupid laws?
  10. A lawyer who can't write properly is like a chef who can't cook.
  11. Being a lawyer requires great intelligence, persistence, and diligence, but none of them would be helpful if you don't have the passion.
  12. Quality of life is a bullshit for lawyers. If you're complaining of not having it, you definitely work in the wrong area.
  13. A lawyer cannot be considered as smart if he cannot produce other smart lawyers.
  14. A lawyer who doesn't know that his job is risky is a dumb, but he is still better than a lawyer who knows the risk and doesn't take it seriously.
  15. What is the first thing to do when a lawyer receives a new assignment? Review it? Make a summary? Nope, request the client matter number!!!
  16. Commercial pragmatists are the future of lawyers: those who can blend smoothly in-depth legal knowledge with practical commercial skills.
  17. To know whether a lawyer is good in making a legal opinion, look not at the content, but on its assumption and qualification.
  18. A little advice to fellow lawyers, never assume that your clients know your assumptions. Assumptions were made to be written not assumed.
  19. As capital market lawyers, our main task is to make proper public disclosure, not fixing all problems. You're not God.
  20. Fellow lawyers, remember this: someday all of our extreme hardship and long hours shall become stories for us to laugh. Be patient!
  21. A first class lawyer is not he who knows everything but he who knows when to stop and say "let me check that again."
  22. Lawyers should be ambitious with their career. Without any ambition, you'll soon forget why you're here in the first place.
  23. Lawyers' dedication comes from belief in excellence. But it must be supported by good rewards. We're not monkeys that you can pay with peanuts.
  24. To be a great lawyer, focus and be an expert in at least 1 particular subject. Being a jack of all trades is only good if you're a clown.
  25. A lawyer needs to maintain his sanity to have a long term career. At certain point, take a nice break and enjoy our life for a while.
  26. For lawyers, clients should always be number one, but don't be naive and make unnecessary sacrifices cause they aren't everything.
  27. A lawyer should master the art of covering-my-own-ass before he can master the art of giving-the-right-solution.
  28. It perfectly makes sense for lawyers to complain on their job. What unusual is the people who think that those lawyers are exaggerating.
  29. In case you have not realized it, there is a limit to which a lawyer can be held responsible for his deeds.
  30. Lawyers are paid to give advices that can be understood by mere mortals. If your lawyer confuses you, you definitely pick the wrong one.
  31. A good lawyer would never choose to advance slowly in his career, as he will always aim for a great leap to fame and fortune. Be ambitious!
  32. Lawyers are problem solver. If you think you're good only for succesfully spotting issues, you're still a half baked lawyer.
  33. Three basic foundations of a law firm: Capital, People, and Reputation. Losing the latter would have the most devastating impact.
  34. A good lawyer knows that the first draft is always a rubbish. It is through continous review and amendment that we produce a masterpiece.
  35. Lawyers' creativity is not granted, it is obtained from countless practices and accumulation of knowledge. There is no short cut!
  36. A good lawyer must be knowledgeable and well versed in many issues, but he understand that it doesn't mean that he knows everything.
  37. A partner might be the most brilliant lawyer in the world, but he is still one person. Without having a solid team, he will certainly fail.
  38. What's the secret of creating the best firm? Recruiting the best people and maintaining them with the best incentives.
  39. I don't care where you come from or your past achievements. What I care is whether you are a good lawyer or not, now and in the future.
  40. For lawyers, the respect from one person is far more valuable than acquaintance with 100 people. Cause the first will be your loyal client.
  41. You work products reflect who you are. While there is always a chance to fix them, why not give a great impression from the first?
  42. Lawyers, your transactions are your portfolios. Make sure that they and your role in them are well recognized by existing and future clients.
  43. A lawyer can't progress to the next level if he can't articulate his ideas in a systematic way.
  44. Lawyers are advisor not decision maker. Our job is to give our best advice and let the client to decide. As simple as that.
  45. What is the biggest asset of a lawyer? A genius mind? Relationship mastery? No! Reputation. Hard to build, easy to lose.
  46. A commercial pragmatist lawyer will try to satisfy the client's commercial needs to the extent possible without breaching the law.
  47. The best part of becoming a lawyer is the fact that the subject of law is pretty much unlimited, there are always new things to learn.
  48. As a lawyer, if we can't do what the client wants, inform them immediately and make them understand. Don't sacrifice the relationship.
  49. In lawyers' job, there is no bullet proof mechanism from making mistakes. Thus, be creative in preparing your ass covering strategy.
  50. Knowing the fee structure of each assignment is essential for lawyers, so they can bill their work efficiently and appropriately.
  51. A lawyer should plan his career from the first day he entered the job. After all, the ending path is always visible, what matters is how?
  52. A good lawyer should know his limit. If you feel you can't handle the workload anymore, do not hesitate to shout it to your boss.
  53. If you're a lawyer, you'll eventually learn that in terms of acquiring knowledge, the sky is the limit.
  54. Clients confidentiality must be maintained by lawyers. If you can't be trusted with their secrets, how can you be trusted for other things?
  55. Actually, lawyers should be prioritized in obtaining scholarship, because a good lawyer is essentially a better legal scholar.
  56. I learn that in term of quality, there is no significant difference between us and foreign lawyers. It's about the correct exposure.
  57. A law firm's opinion must be unanimous, thus no lawyers in such firm can issue a dissenting opinion. I too am obliged to follow that rule.
  58. For some lawyers, lawyering is a way to earn living, but for some others, lawyering is a way of life. I am for the latter.

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Thursday, September 02, 2010

On Why Prison is Overrated in Solving Corruption (Indonesian version)

Here is another piece of article in Politikana discussing the latest sanction for Anggodo. I am more and more convinced that we need a better form of sanction rather than sticking with prison.

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