By Koby Fleck
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 In the case of the Xerox salesmen, an outdated commission structure existed that encouraged them to sell their customers an inferior and probably over-priced product – a potentially unethical and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.
Imagine what would happen to Xerox or even your own organization if these types of self-centered behaviors or outdated systems were allowed to exist? In Xerox’s case, it would only be a matter of time until customers would discover what sales reps had sold them – an inferior, outdated, and over-priced product. Everything from trust, to corporate goodwill, to the long-term buying patterns of the buyer could be dramatically affected.
Staff at every level must be rewarded for the behavior and outcomes that are desired. Having the wrong or outdated reward system entices people to do what is in their own short-term self interest, instead of what is in the best interest of the customer or the organization in the long-run.
Because of the level of change in an organization’s external environment, it is easy for your existing business model, operational systems, or reward structures to become outdated. If that occurs, employees and managers will often continue to produce the short-term outcomes they are rewarded to produce, instead of the outcomes that are best for the organization in the long-run. Sales people might decide to sell a lower quality product to a client because it has a higher commission attached. Long-term sales with those clients could suffer. A manager may determine that it is appropriate to gouge customers and suppliers to meet short-term projections. Those relationships will probably be severely damaged. A human resource director may be tempted to cut employee benefits and salaries, and employee loyalty could be hard to regain.
These could all be examples of the outcomes of an outdated incentive system combined with a short-sighted focus on revenue generation. These behaviors can produce unethical outcomes and can become unprofitable for an organization over time.
Schedule a time to re-think the performance evaluation standards for your employees, reward systems, or bonus structures. These questions should help to guide your thoughts: Have the external realities of your business environment changed?
Have the outcomes you desire of your employees or managers changed?
Does your reward system or how you evaluate your employees’ performance need to be updated or realigned with new business priorities?
Can you reward your employees or managers for focusing on both the short-term and long-term health of your organization?
One of my favorite consultants, Alan Weiss, reminds sales professionals to, “Think of the last sale first.” Whatever your role, employee or executive, in terms of business ethics and long-term profits, we have to take our eyes off our own short-term gains while placing a greater emphasis on the long-term, in terms of our relationships, profits and our career objectives. To ensure that individuals in your organization, “think of the last sale first," re-evaluate your incentive systems to ensure that individuals are rewarded for the long-term outcomes you desire.
Copyright 2005 Koby Fleck. All rights reserved.
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