follow the money

Detective shows sometimes say that they need to “follow the money” to see who is behind the crimes they are investigating. The phrase makes sense in the leadership/HR world too. Whenever people are consistently doing something different than intended, it makes sense to follow the money to see why. Chances are, somewhere along the line, they are being rewarded for the behavior.

I mentioned this a couple of months ago when a co-worker bought a car and was pestered, hounded, and bullied to give the salesperson top scores on the follow-up customer service survey. The company’s emphasis on measuring customer service and ultimate reward/punishment for the salesperson was creating behavior exactly opposite of what the survey was supposed to create. How do you explain an emphasis on customer service creating really poor customer service? Follow the money.

On a lighter example, my son participates in Tae Kwon Do. One day while they were doing light sparing, the instructor kept complementing my son’s punches and then telling him to work on his kicks more. However, the instructor was so complimentary towards my son’s punches, that it was little surprise he kept using them, even when he was supposed to be working on kicks. Why do people do something other than what we ask them to? Sometimes it’s because we ask for one behavior and reward another. Follow the money.

As a third and final example, I recently purchased a new car and ended up buying an extended warranty. I think extended warranties are generally unnecessary and a waste of money, so why did I buy it? The sales and finance managers were so insistent on selling it to me and I resisted for so long that they finally dropped the price to where it was silly to say no. What started out as being $2500 for an extended warranty to 100,000 miles, ended up being $216 for an extended warranty to 75,000 miles. I find this example interesting because: 1) the purchasing experience was pretty mellow and friendly and low-pressure except for the warranty; and 2) the price dropped by a factor of 10. How is this possible? Follow the money.

I nixed the extended warranty early on and then the sales and finance managers brought it up again near the end: “If you could get it for $X, would you do it?” No, no, and no. They tried the prudent / concerned approach: “These cars don’t break much, but when they do it’s expensive and I want you to be taken care of.” The you owe me approach: “I’ve come down on all these other things, why won’t you get the warranty?” The subtle emasculation: “It’s only $10 more dollars a month, but if it’s a matter of money, I understand…” Every “no” brought them back with a different approach and a lower price until it became almost comical.

Why? How? I’m guessing at this point, but the warranty is through a third party. I suspect the sales and finance managers get a bonus for each warranty they sell (and I suspect it’s a flat bonus, unadjusted for the price the warranty sells for). I also suspect that there is a lot of margin built into the price of the warranty so there’s room to negotiate. Finally, I suspect that the dealer ended up subsidizing the warranty. That is, I’d bet that on paper the price of the car was reduced to account for the warranty and keep the monthly payment almost the same. Again, I’m completely guessing, but if all my guesses are correct then two managers worked together to increase their income at the expense of the dealer’s profit. Counterproductive behavior, so why do it? Follow the money.

It makes me wonder how often poor behavior and performance is a nearly direct result of how we choose to praise, reward, and compensate our employees. People do what you reward them for. Are we rewarding them to do the right things?

Follow the money…