Accountability is sometimes confused with financial incentives. After all, financial incentives require a certain level of accountability. Before any punishment or reward can be doled out, measurement and reporting are required. It seems, however, that when some people talk about accountability, they actually mean punishments and rewards.

The term “accountability” is bandied about a lot in politics and in management. President Obama wants to hold BP “accountable” for the Gulf of Mexico oil spill. What does that mean? In a word: sanctions. Politicians want to hold the public education system accountable for outcomes. What does that mean? Pay for performance, or financial incentives. CEOs are accountable for corporate success, which usually translates into huge bonuses. In each of these cases, “accountability” is practically a synonym of financial incentive.

So where is the problem? In the Gulf of Mexico, the problem is that the ban on offshore drilling doesn’t address the actions of BP. It addresses the fear and anger, and is an effort to punish an entire industry for their “sins.” In public education, the problem lies in the lack of control teachers have over the outcomes for which they are held accountable. Multiple studies have shown that socio-economic factors explain more of the variance in grades than does excellent teaching. The problem in the office of CEOs is that short-term incentives reward short-term behavior, sometimes to the detriment of the long-term viability of the company. Lehman Brothers is an example.

Each of the above examples have one thing in common. The problem lies with tying accountability to outcomes. If we stop to reflect, outcomes are almost always unpredictable. Buying a portfolio of real estate loans may work well for decades, then suddenly crumble. The chief executive of Lehmans can’t be expected to predict the sudden reversal of the economic environment. Everyday choices pose the same problem. As an example, a couple planning a dinner party is an exercise in uncertainty. It remains unknown which guests will attend, even if they RSVP, what the conversation will revolve around, and whether or not everyone will have an enjoyable evening.

If outcomes are always unpredictable, how should accountability work? There are four steps, and I will use the dinner party as an illustration. First, as is already common, we set expectations. We must outline our goals, or the outcomes we would like to achieve. This is already understood. In our example, a couple wants a dinner party to provide an enjoyable evening for a group of friends. Second, we must focus on choices made, not on outcomes. Even if the outcomes are disappointing, it may have been unforeseeable to the agent. Suppose that, at the dinner, one of the guests becomes drunk and boorish, offending other guests. Are the hosts accountable for the outcome? In my opinion, assuming they didn’t desire this outcome, we can only review their choices. Was it reasonable to invite this guest, or did he have a history of offending others? Was it reasonable to serve alcohol, or did they know their guests had a low tolerance? The third step is review. This is a chance for the agent to describe their choices. After the dinner party, the hosts will review the evening. If they made reasonable choices, the outcome can only be accepted as unfortunate, but unavoidable. Energy should be spent on fixing the situation, not wasted on recrimination. The final step is reviewing how well their choices translated into reality. Because we all hold a biased world view in our minds, it is helpful to measure our perceptions and decisions against reality. This might cause the agent to reassess previously held assumptions or to refine their perspective. The hosts of our hypothetical dinner gathering may reassess their opinion of the boorish guest or their attitude toward alcohol.

Accountability is important, but it is so often wrongly applied. It is important to review people’s choices and reflect on whether or not results are satisfactory. Done properly, this can be a learning experience. Part of why financial incentives seem to work is because they include measuring and reporting, aspects of accountability. However, incentives ignore the agent’s motivations, which are more telling than the outcome.