Is Fannie Mae a Model for Bush Education & Health Care Strategies?

Dear President Bush,

Did you note the distortions incentive pay and executive bonuses caused at Fannie Mae, the government mandated home mortgage company? It resulted in 7 straight years of accounting fraud and overstated financial performance of $11 billion. The fiction allowed management to meet their performance targets thus ensuring senior leaders collected millions in bonuses.

Are you aware of the parallels between the Fannie Mae compensation system which rewards performance and your lead strategies in education and healthcare? Systems that incentivize good performance and punish bad performance distort the larger organization in and of themselves. They encourage leaders to optimize their pay, usually at the cost of the greater mission. Fannie Mae, the second largest financial institution in America, is the latest such example.

Yet, this model is the core of your education initiative, No Child Left Behind. How many upstanding education systems will be distorted by scampering for rewards? Which ones will pull a Fannie Mae and fabricate results so they can get the prize?

The rage in health care is how to incentivize providers to deliver high quality care. The federal government and private insurers wish to offer physicians and providers a financial reward for exemplary performance. The flip side of the coin is punishment should that reward not be received.

Are you aware money is an extrinsic motivator? Do you believe health care professionals lack the internal or intrinsic motivation to deliver high quality health care? Do you know extrinsic motivators destroy our natural internal, intrinsic motivation?

Besides layering a distorting compensation system onto an education or health care organization, your initiatives will destroy many people’s natural intrinsic motivation to do a good job teaching, nursing, helping others in our society.

Systems produce results. The Stanford Prison Experiment showed how taking a group of college students, randomizing them into guards and prisoners produces competitive, win/lose, power over systems. The Fannie Mae incentive bonus system for senior leaders showed how the organization lied, cheated, and stole to insure their chiefs got their bonuses.

What other systems exist that distort behavior to the greater societal loss? Campaign finance is one. Fannie Mae’s corporate little brother, Freddie Mac, did major political influence buying to the point of a $3.8 million Federal Election Commission fine in 2006. Freddie Mac donated $6.6 million in the 2000 & 2002 election cycles, 57% to Republican and 43% to Democrats. What did that buy them?

As the Fannie Mae example clearly shows, bad systems produce unseemly results. The people are now well aware of the rampant corporate influence buying in our hallowed halls of government. Those same halls now push incentive systems that distort the organizations educating our children and healing our citizens. Can things get any worse from a leadership standpoint? I am afraid to consider the possible answers to that question….