One of the more common challenges that growing companies face is balancing the needs and goals of the company with the needs and goals of its employees. And, unfortunately, all too often decisions are made with a business perspective that don’t take into account the potential effects on the personnel side of the equation. The simple fact is, people will do what we incent them to do and what we reward them for far more often than they will do what we want them to do, if there is any misalignment between the two. This applies across the business — from high-level executives to entry-level employees, and even out to our products — how we position, package, and price our products can often drastically affect how people will perceive and use the product.
While people always seem to nod their heads when you tell them this, it’s rather insane to realize just how often we create competition between these two things. Here are some things to consider when you’re trying to figure out how to get people to do what you want, or why they’re not doing what you expected.
Bigger Isn’t Always Better
I know, I know — this sounds so stupid to say out loud, because it seems like so much common sense. But, I’ve found that in reality much of what we consider to be “common sense” isn’t as common as we think. Take, for example, the small company that pays its sales staff on a strict commission basis — the larger the deal, the more money the sales person makes. That makes sense, doesn’t it — you want the company to make money so you encourage your sales people to make big deals. But wait — do you see the contradiction there? Don’t worry, most companies don’t — but the fact is that “making big deals” doesn’t always equate to the “company making more money.” How can that be? A few reasons:
- Bigger sales often have longer time to close and involve more negotiation on key terms;
- Bigger sales sometimes involve customers who are going to stress your product, costing time, money, and effort beyond the average; or
- Bigger sales create dependencies on small numbers of customers for ongoing revenue…
The list could go on and on — but all too often, people aren’t thinking about the relationship between how we’re incenting our sales teams and where we want them to exert their energy. Your company can say again and again that it’s a mid-market player with small-business aspirations — after all, that’s usually where the volume is. but if you’re compensating your sales team based on deal size and not volume, then there’s no guarantee that you’ll actually grow that mid-market business in reality. You’ll see lots of high-price deals, which usually means higher-end and more-demanding customers, but not the volume growth that you may actually want.
Be Careful How You Define “Quality”
Sales isn’t the only place where we see people doing what they’re rewarded for rather than what we want them to do, though they’re often the poster children (primarily because of their direct link between job performance and compensation, who can blame them?). Other areas of your company will follow the same pattern — if you run your support team like a call center, focused on time between calls, first-call resolution, time on the line, etc. then don’t be surprised when your support system isn’t full of detailed notes, or customers have to call repeatedly after being told to try something and call back, or other customer-unfriendly behaviors. You’re telling your team that you value the metrics over the customer — which is always a recipe for disaster. Similarly, don’t make the mistake of tying “bug counts” to software quality, like so very many companies that I’ve known…yes, bugs are bad (mmmmKay?) — but just latching onto a metric like bug count that’s not only entirely within the control of the team that you’re measuring, but also so very easy to game, is just asking for trouble. And even if people don’t do it intentionally, subliminally they’re going to second-guess themselves every single time they consider filing a bug…which is the opposite behavior of what we want. As a Product Manager, I want my teams to file every single bug they find so that we can understand where we’re missing our quality bar, what we’re not taking into account, and to triage and adjust as needed. If people are second-guessing themselves, because they’re afraid of “dinging” their team at performance review time…well, let’s just say that you’re not going to see the uplift in “quality” that you expect. Sure, your bug counts will go down — but that doesn’t mean that things are actually improving to any appreciable degree.
Customers and Users Aren’t Immune
Finally, don’t think that this stops at the four walls of your building — the messaging that we send out to the market, the pricing signals that we send to our prospects, and even the image that we present online as a company has dramatic effects on how we are perceived by our customers and how they will wind up using our products. The more we paint our products into a corner — the more we focus on specific market niches — the more we’re telling everyone outside of that niche that we’re not for them. The more technical jargon you use on your website, in your collateral, in your pitch decks, the less attractive you are to your less-technical buying decision-makers. The more you focus on the competition, the more your customers will do so as well. Everything that we say or do has an effect on those receiving our messages, and often we make decisions that actually wind up causing those customers, prospects, and users to make the opposite assumptions about our product and our company than we intend. War story example: one company that I worked for many years ago regularly entered into initial negotiations at our rack price, which was on the high end in the market, presumably because we considered ourselves a premier product & service provider. Then, we’d discount that price, by 10%. Then, we’d discount that price by another 5%. Then we’d…you get the point. Our deals would generally close somewhere in the 40-50% “discount” range. Which is still great when you’re dealing with deals in the seven figures; but what the company didn’t see was the message we were sending — we weren’t really a “premier” provider, we were now a “discount” provider — even though our final deal values were still above the mean value in the market. And that reputation followed us — the deals kept getting further and further discounted, even when we started with a lower initial bid.
Be wary of the message that you’re sending to your employees, your partners, and your customers — be thoughtful about what you’re asking them to do and what you’re rewarding them for doing in return. Don’t simply assume that attaching a metric that “works” or “looks good” is actually going to drive the right behavior — think through all the possible consequences of your decisions, think about how someone might “game” your system, think about the unintended side-effects of what you’re trying to do.