Post 7 — "People Would Not Do This"

Every week I take one real case — a company, a government program, a league — and show how the reward shaped the behavior. Welcome to Behavior Follows Rewards.

When the reward is for running the program, the program runs. When nobody is rewarded for stopping it, it does not stop.

Northern Ireland paid more per unit of fuel burned than the fuel cost, and the boilers ran all winter in empty sheds.

In August 2013, Janette O’Hagan was trying to sell energy efficiency controls to Northern Ireland businesses.

Her company claimed its product saved customers an average of 30 percent on their heating bills. It should have been an easy sell. Instead, she was watching potential customers lose interest in efficiency altogether — because a new government incentive scheme had made wasting heat more profitable than conserving it.

The Northern Ireland Renewable Heat Incentive — officially designated the “RHI Scheme” (in British and Northern Irish government usage, “scheme” is the standard term for a formal government program) and administered from 2012 by the Department of Enterprise, Trade and Investment (DETI) — paid businesses a subsidy for every unit of heat they produced from biomass boilers. The problem was the rate: the subsidy exceeded the cost of fuel. For every pound spent on wood pellets, the government paid back more than a pound in subsidy. Burning more meant earning more. The predictable response was to burn as much as possible — whether the heat served any purpose or not.

Businesses understood this immediately. Energy efficiency had become an obstacle to income.

On September 3, 2013, O’Hagan wrote to the office of Minister Arlene Foster, who had launched the scheme. “Given the benefits of RHI,” she wrote, “we find that many of our potential customers are no longer worried about becoming more efficient, in fact it pays them to use as much as they can — in fact the incentive to use more is leading to misuse in some cases.”

The Department met with her on October 8, 2013.

She told officials the flat subsidy rate gave businesses no reason to be efficient. Buildings were being heated year-round with the windows open. Installers, she had found, were actively discouraging customers from pursuing energy efficiency — because wasting heat was more profitable than saving it. Great Britain’s equivalent program had built in tiered subsidy rates precisely to prevent this kind of abuse. Northern Ireland had not.

The officials told her they did not believe this was happening. In their view, she later recalled, “people would not do this.”

No formal record was made of the meeting. Officials described her evidence as anecdotal. One suggested she contact a different government department. The meeting produced no investigation, no audit, no follow-up.

O’Hagan left, as the Inquiry later noted, “with a feeling of frustration, believing that it had been a waste of her time.” She later told the Inquiry that the scale of the abuse had been obvious — her words to the panel: visible to “a blind man on a galloping horse.”

She came back.

In May 2014 she emailed DETI officials again, offering to provide specific evidence of abuse. In March 2015 she emailed again. Each time the response was inadequate. Each time the program continued unchanged.

When Northern Ireland’s internal auditors reviewed the program’s governance in early 2016, they found it so deficient that the head of Internal Audit called it the worst opinion he had delivered in more than 500 system audits — “unacceptable,” in his assessment. He did not learn that O’Hagan had been warning the Department for three years until September 2016, when her emails finally reached him. They had never been escalated.

The program was closed to new applications in February 2016. The government had committed more than £1 billion in future subsidy payments — for heat that had frequently served no purpose except to collect money. The Northern Ireland Assembly fell in January 2017.

You have been in a meeting where someone raised exactly this concern. The room moved on. The mechanism is identical.

Two reward structures are relevant to what happened in Northern Ireland from 2012 to 2016.

One rewarded businesses for burning fuel. They responded exactly as designed.

The other rewarded civil servants for program delivery — getting businesses enrolled, meeting uptake targets, reporting that the scheme was achieving its stated goals. That was the positive reward. When O’Hagan raised her concerns, acknowledging them would have meant admitting the scheme’s apparent success was built on waste. Officials had no institutional reason to take that on. Acting on her warnings would have meant admitting they had designed something that invited exploitation. The reward for that admission was negative. The reward for continuing was neutral. They continued.

The Inquiry described O’Hagan as “an impressive witness” and found that her treatment by the Department “fell well below the standard that she was entitled to expect.”

She received no formal reward. No government recognition. No apology. Seven years after her first warning, a retired judge dedicated an entire chapter of a 656-page report to her testimony — titled “Janette O’Hagan and Her Attempts to Warn About the Problems with RHI.” She was still running her company, still selling energy efficiency controls to Northern Ireland businesses. The program that had once made efficiency worthless was gone. The Inquiry had confirmed everything she said.

She was right in 2013. She was right in 2014. She was right in 2015. Nobody listened.

A quick detour, because this matters. O'Hagan didn't need a title or an institutional role to see the flaw -- she needed a bill she couldn't explain and a business she couldn't understand not to lose money on. The people closest to a broken incentive often see it first. The question is never whether someone raised it. It's whether anyone was rewarded for listening.

The pattern is consistent. When the reward is for running the program, the program runs. When nobody is rewarded for stopping it, it does not stop. O’Hagan had no institutional role, no subsidy, and no reward for raising the alarm. The Department did — and declined to act on it. The behavior you get is the behavior you designed the incentive for, including the behavior of the people who are supposed to be watching.

Who in your organization is raising a concern that your reward structure gives others no incentive to hear?

Ask yourself: are you paying for activity or for outcome? They are not the same. The Northern Ireland RHI paid for activity — and activity is easy to game. The government had committed an estimated £490 million in future subsidy payments before anyone moved to stop it. Outcome requires harder design, but it's the only thing worth measuring.

If you are working through an incentive design challenge in your organization — trying to understand why a policy, initiative, or team isn’t doing what you designed it to do — that is the work. Advisory Services →

Behavior Follows Rewards. The pattern shows up wherever people are measured and rewarded.

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—Wayne

Going Deeper

The RHI wasn’t a secret. The rate was public. The math was simple. Ask yourself: if you were one of the farmers collecting £1 million over 20 years to heat an empty shed — would you have stopped?

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Last time: Wells Fargo gave its branch employees a quota for eight products per household — and got 3.5 million accounts no customer had asked for.

Next: In Brazil, the government offered poor families a monthly payment if they kept their children in school and attended regular health checkups. Attendance went up. What the reward actually produced took longer to see.

In development — a corporation whose internal ranking system made employees compete against each other instead of the competition; a pro sports league that rewarded losing for four decades. More on the way.

Sources

Report of the Independent Public Inquiry into the Non-domestic Renewable Heat Incentive (RHI) Scheme — Volume 2, Chapter 23: “Janette O’Hagan and Her Attempts to Warn About the Problems with RHI.” March 2020.

Report of the Independent Public Inquiry into the Non-domestic Renewable Heat Incentive (RHI) Scheme — Volume 3, Chapter 56: Summary and Recommendations. March 2020.

Northern Ireland Audit Office — “Investigation into the Renewable Heat Incentive Scheme.” June 2016.

"RHI scandal: DUP seek assembly recall to deal with £490m overspend." BBC News, January 4, 2017.

BFR is written to be accessible, welcomed, and celebrated by every reader — not simplified, not elevated. Just clear.