This is why you shouldn't set compensation policy
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This is why you shouldn't set compensation policy

Paul Holmes

The idea that “culture trumps strategy” has been around for a while now. In 2011, Harvard Business Review published an article by consultant and author Nilofer Merchant in which she argued that “the best strategic idea means nothing in isolation. If the strategy conflicts with how a group of people already believe, behave or make decisions it will fail.” Earlier this year, in an HBR blog post, Kevin Evers made an additional argument: “For a company to succeed, strategy is important, but a great culture is paramount. It’s the one distinguishing feature that a competitor can’t duplicate.” I think the argument is correct as far as it goes. But it’s not the whole story. Because incentives trump culture. Or more accurately, incentives define culture. They tell employees what kind of behavior will be valued and rewarded and as a result they drive the behaviors that customers and other stakeholders experience when they interact with an organization. Which brings us to this story about Comcast, which Slate speculated might be “the worst customer service call of all time.” (It isn’t. My wife and I were once harassed over a period of several days by a salesman who could not understand why we didn’t want to switch our electricity provider and who refused to be deterred by a polite ‘no’; hang-ups; or screaming pleas to ‘leave us alone.’”) When I read about the customer service rep’s behavior and listened to the call, my first thought was that this was not random behavior; it had to be something the company had—intentionally or not—encouraged. And sure enough, a follow-up story suggests that Comcast’s compensation incentives make this kind of behavior inevitable by punishing employees who don’t fight to hold on to every customer. As Jordan Weissman explains: “We were all listening to a deeply fearful employee trying to hold onto his paycheck.” In some ways, this is a fairly mild example of what can happen when you get incentives wrong. More serious crises resulting from this kind of problem range from the Sears auto repair center crisis that I covered more than 20 years ago (mechanics were rewarded based on how many repairs they carried out; as a result they found things to repair even when vehicles were in perfectly good working order) to BP’s Deepwater Horizon crisis. The Comcast customer service call is just another example of the way that compensation and incentives have the ability to drive perverse behaviors and impact an organization’s reputation—and thus a reminder that public relations professionals such be involved when such policies are put in place.  
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