0

Perverse Incentives And Your Business

Perverse incentives are everywhere. I guarantee you've got at least one in your business right now.

ARE YOUR BUSINESS PROCESSES AS CRAZY AS THIS?

cambodia a book for people who find television too slow perverse incentives

I was talking about Cambodia: A Book for People Who Find Television Too Slow (NOT an affiliate link) and it triggered another memory.

This was another little European colonial adventure into darkest Africa. The name of the game was “Take The Rubber” so that natural resource could be used back in the civilized world. The Congo was divvied up between some corporate concessions and here’s where things start to get weird.

Perverse Incentives In The Belgian Congo

Some soldiers were required to account for every single bullet they’d been issued.

They either had to have the shell...or the hand of a native they’d presumably dispatched with said ammunition.

Humans being occasionally awful, you can see where this is headed.

Emil decides he wants rabbit for a late afternoon snack. Not being the greatest shot, he pops off three shells before hitting his target.

Let’s say The High Command is all right with the rabbit accounting for one of the shells. But the first two shots? Them bullets have to be accounted for somehow.

A lot of Congolese ended up walking around as amputees.

Logical. Right? The ultimate in Lawful Evil mentality, for you gamers.

Your Business And Perverse Incentives

My question for you today is: Are there processes in your business that are as nuts as some of those of the Belgian Congo? Are you measuring and creating results because of a robotic “If This Then That” conformity with loony premises? Is it time to make a change towards sanity?

Additional examples of perverse incentives are the:

  • Soviet era glass plant, first making too-thick and then too-thin glass, neither of which was useful to anyone but still satisfying the incentive structure
  • System that at first rewarded private firms transporting prisoners to Australia by the number of convicts loaded at departure, rather than those who arrived at the destination...leading to overcrowding and unnecessary deaths
  • time IBM attempted to produce more robust code by rewarding programmers by the line, which instead lead to bloated programs.

I describe a factory that produced a production scam with its piecework reward structure from my own experience in this podcast.

Government organizations such as the US Department of Veterans Affairs are not exempt from claims of perverse incentives.

Perverse incentives are particularly common in sales compensation programs.

Frankly, if you think your system is "too good for" or somehow exempt from perverse incentives, you probably aren't looking hard enough.

>> Jason Kanigan is a business strategist trained in operations improvement methodologies. To book a time to discuss your situation with Jason, click here. <<

1

State of Sales

state of salesState of Sales: I was recently asked on an expert platform what selling techniques, tools or trends we'll be seeing.

State of Sales Trend Number One: Personal Selling Skills are King

Personal selling skills, that is: an individual's ability to sell 1-on-1 in person or over the phone, are going to become noted as one of the most valuable skills in the marketplace. They already are in fact, but have not yet been held up as such.

Automated marketing has worn out its welcome: banner blindness, single digit email open rates, bland copy by a flood of inexpert writers...all have contributed to the end of pushbutton marketing's effectiveness. This may be acceptable as a lead generation tool, but when it comes to qualifying and selling, the return to personal selling, rather than the panacea of automated marketing promising to keep topic matter expert business owners safely away from the scary necessity of actually talking to people, is what will succeed going forward.

State of Sales Trend Number Two: Consultative Selling Skills In Complex Sales

I think we can agree that consultative selling has pushed out traditional features-and-benefits-based selling in the complex sale situation. Many brands of consultative selling exist but the essential process is the same. The learning issue seems to come down to finding and choosing a trainer you are comfortable with. This coach must not be the salesperson's boss, because telling the full truth to your boss can be a career-limiting move. Employees must feel free to share complete details of what is actually happening with their coach without fear of repriasal--or they won't get the benefit of coaching.

State of Sales Trend Number Three: Video Training for Repetitive, Global Concepts

For training, video is an excellent resource. When it comes to repetitive, non-individual-specific concepts and technical information which can be conveyed by automated knowledge transfer, video training is effective.

Business owners and executives are also finally arriving at the understanding that there is no quick fix for sales training. A short technical sales training seminar will not do the trick: employees may get a short term "rush", but in a couple weeks will be back in their old comfort zone and performance limitations. Sales training must be understood as an ongoing investment and process. Many months of consistent effort, training and experience are required even before one can say a salesperson has been sufficiently prepared to deal with the big bad world.

For larger sales forces, one or more dedicated trainers are necessary. If a company tries to have a sales manager who also has a personal revenue quota, that individual will likely fail because they cannot split their effort between selling and coaching.

I may return to this topic of the State of Sales as there is much more depth to explore in the current State of Sales. However, in the meantime, here are many interviews with sales industry experts you can listen to which echo what I've said.

>> My Superpower: "I will find the hidden profits in delivering your product or service to the customer." ~Jason Kanigan | Like this? Subscribe for new posts! <<

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.