How NOT to implement a policy of discrimination

To align the incentives of employees with the goals of an organization, you have to give employees (i) enough information to make good decisions; and (ii) the incentive to do so. The most important part of creating good incentives is measuring performance.

When you want employees to devote effort to more than one task, you have to worry that they spend the right amount of effort on each task, e.g., so that sales employees spend the right amount of time cultivating new clients in addition to serving current clients. In this case, you might have to adopt more complex evaluation metrics, e.g., existing sales and sales from new accounts. With more than two tasks, this becomes even more complicated, and you are probably better off using subjective performance evaluation, using the observed metrics as inputs into the subjective evaluation.

When the two tasks compete with one another (to do more of one, you have to sacrifice the other), the management problem becomes almost intractible.  I was reminded of this when I heard about the Episcopal Church's competing "norms" for disposing of churches left empty by schismatic congregations: it wants "fair market value" for the property, but it also would prefer that the church not be sold back to the schismatic church.

When the Church of the Good Shepherd in Binghamton, N.Y., left the Episcopal Church ..., the congregation offered to pay for the building in which it worshiped. In return the Episcopal Church sued to seize the building, then sold it for a fraction of the price to someone who turned it into a mosque.

When the schismatic church is the highest bidder for the property, their bid represents market value. In fact, this is the point of using an auction to sell the property. A diocese, like Binghamton, then faces a dilemma about which norm to follow. They cannot follow both. In this case, they gave up on fair market value in favor of discrimination against the schismatic bidder.

A better way to discriminate would be to specify a bidding "tax" on the schismatic churches, e.g., to win they have to bid 10% more than rival bidders. This would give the diocese clear direction on when they should prevent the schismatic church from buying the property. And if the schismatic church is likely to be the high value bidder for the property, then such a tax has the potential to increase revenue, e.g., as in this application. However, a bidding tax could also result in some inefficiency (the high value bidder does not always win), and it makes the discrimination against the schismatic churches very visible, which could generate opposition to the policy.