Early in Xerox’s history, the company’s founder, who was then working in government, returned to Xerox because he couldn’t understand how their newer, better machine was selling so poorly in relation to their older, inferior machine. When he looked into the situation, he found that the commission arrangement for the salesmen was far greater for the inferior machine.
If we desire employees, managers, or executives to behave in certain ways we must ensure that systems exist that reward them for the behaviors and outcomes we desire. In the case of the Xerox salesmen, an outdated commission structure existed that encouraged them to sell their customers an inferior and probably over-priced product – a potentially unethical and unprofitable business activity for both parties. Read the rest of this entry »