Once upon a time, one morning, in a magical kingdom far, far away, the chief magic officer (CMO) of Magic Factory, Inc. stood in front his magic mirror, reflecting on life, business, things, and (literally) himself. He was worried. He had a big problem, and he didn't know how to solve it.

The problem was thus: Many of the potions and spells created by Magic Factory, Inc. were of poor quality—some failed to work at all, some failed to live up to expectations, some worked quite differently to what was expected, and some caused bad and dangerous consequences. To be fair, some of them worked OK, but customers were unhappy and revenues were down. The factory magicians—crafts-folk and bringers of joy and magic—were depressed. They hated it when their magic failed. It was an unhappy place to work.

The pressure was on.

Time for breakfast.

After breakfast, the CMO (his real name was Roy) climbed aboard his broom and flew into work. Once there, he went straight to his “magic chamber”—the en suite in his office—took the golden key that hung from the golden chain around his olden neck, and carefully unlocked the secret chamber hidden within.

From the secret chamber (the cleaners also stored their cleaning potions and such there), he removed his old, magic, crystal ball, dusted it off, and took it through to his office where he placed it upon his magic desk. Nervously, he sat down at his desk and placed two hands firmly on the crystal ball. With a magical third hand, he scratched his nose. He leaned in, muttered several magic words, and waited. Nothing. He muttered several un-magic words—the sort he would never mutter in front of his mother—and then tried again. This time, the magic worked. The crystal ball clouded over, the room cooled, and a shrill voice said, "What?"

The CMO whispered his problem to the ball.

The ball clouded over, said, 'Please Hold', and started playing gentle elevator music. Six minutes and sixty-six seconds later, the music stopped and the ball said, “What good behaviors do you want to see?”

The CMO thought and thought, then he said, “First, I want our tester wizards to find more defects before the potions and spells leave the factory.”

The ball said, “OK. Find more defects. I'm sure that's possible. What else?”

“Second, I want our developer wizards to fix all of those defects before they leave the factory.”

“Before the wizards leave the factory or the defects the factory?”

“Both.”

The ball clouded over, the elevator music played and played and played, and eventually the ball said, “Measure the behaviors you want. Reward them.”

So, that's what the CMO did. When a tester wizard found a defect, the CMO paid that tester twenty coins. And, when a developer wizard fixed a defect, the CMO likewise paid that developer twenty coins. The tester wizards promptly started finding more defects, and the developer wizards promptly started fixing more defects. This was their focus. The CMO was very happy. The tester and developer wizards were very happy. Some of them bought new cars and iPods. Quality went up a bit. Customer complaints went down a bit. The CMO was delighted.

Many months passed, and one morning the CMO stood in front of his bathroom mirror, devastated. Quality was up, but production had dropped. So had sales, and therefore revenue. The tester wizards and developer wizards spent so much of their time finding and fixing defects that production was bound to drop. That was understandable, he thought. Surely, it was the cost of quality?

He put on his wizard's hat, hopped on his broom, opened the window, and took off. As he flew, he worried. He alone knew that Magic Factory, Inc. was going broke. How could this be? Quality—or, rather, the number of defects found and fixed—was up. They were the same thing, weren't they? You measure one and you get the other, right? He threw his arms up in the air, in despair, and then caught them on the way back down.

When he reached the factory, he did not go directly to his office. Instead, he flew up, up, up above the factory and hovered there. He looked down at the car park, full of shiny new cars. Never in all the years he'd worked in the factory had he ever seen the staff so happy. He had been particularly pleased with how, after many years seemingly at war with each other, the tester and developer wizard teams had started working together. Recently, he'd even noticed the tester wizards and the developer wizards having lunch together!

They had started collaborating shortly after the defect numbers dipped. He felt proud when he'd noticed that. They must have felt bad about the drop in quality. Working harder to find defects wasn't enough, so they collaborated. And it worked! As if by magic, the defect numbers went up.

He imagined them, his magical staff, eating their lunch and pondering how, if they just worked together, they could find more defects and fix them. That must be what they were talking about. That and football. And magic., of course. Wizards always talked about magic. You couldn't stop wizards talking about magic.

But, he felt sad. If things didn't pick up, he would have to close the factory, and all the wizards who worked there would lose their jobs. They might have to sell those shiny new cars.

The CMO never figured out what the wizards were talking about. Eventually, they even stopped talking about magic. Instead, they talked about cars instead and how to ensure they could afford to keep up with their monthly car payments.

And, if you were to find that golden key and enter that secret chamber, and ask that old, magic, crystal ball what it all means, a shrill but wise voice would respond, “You get what you measure and reward. Be very careful what you measure and reward.”

This is based on a true story.