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THE POWER OF NOTICING: WHAT THE BEST LEADERS SEE
Author: Max H Bazerman
Publisher: Simon & Schuster
Price: Rs 699
ISBN:9781476700298
I have heard many tough-minded executives use this phrase, "We Reward Results", to sum up their management approach. Incentives are a key driver in a market economy, and one that I generally value. However, it is important to think through how people will actually respond to incentives, and too many executives do not do this often enough.
Take the retail market for computers and computer equipment. Due to product overlap among retailers and tough competition from Internet sales, the market is cutthroat and generates small profit margins. For many retailers, the real money comes from selling add-ons - peripherals, warranties, and service agreements - all of which have higher profit margins than the advertised laptops and printers. So the solution that many retailers have hit upon is to reward salespeople for selling these extras. What is the indirect result of this strategy, and should executives have anticipated it?
One organization that has rewarded salespeople for selling add-ons is Staples, the large US office retailer. "The average needs to be $200," Staples manager Natasja Shah told reporter David Segal for his New York Times feature "The Haggler." That is, as part of an incentives system called "Market Basket," each time a Staples employee sells a computer, he must sell about $200 worth of other stuff to meet his target. According to Shah, this average is carefully tracked. Staff who don't meet their goals are coached. They can end up with lots of night and weekend shifts, a reduction in scheduled hours, and even disciplinary actions that can lead to termination. "If you can't do the job, you can go sell fries at McDonald's," a Staples supervisor told one store manager who had concerns about the Market Basket system.
Given that this chapter is about the indirect effects of unethical behavior, you already have a hint about how such a policy might affect Staples customers and the company's reputation. But let's take a look at this posting from an unhappy Staples customer from the consumer website www.my3cents.com, as reprinted by Segal in "The Haggler": I had an appalling experience in not one but two different Staples stores yesterday ... Staples featured an Acer laptop advertised in the Sunday newspaper insert yesterday (3/8) for $449 ... Upon my arrival, I found an associate who informed me that the laptops were in stock. However, before he would get me one, he proceeded to try to sell me his "protection plan." ... I declined this. The sales associate indicated that it was ok, and then walked away to, I assumed, get my computer.
He returned with the store's general manager who again proceeded to aggressively push the protection plan onto me. He was extremely rude, implying that I was "cheap" for not adding the plan. He walked away when I finally maintained I did not want it. ... Moments later, the sales associate informed me that the laptop was not in stock after all. Just to summarize the timeline. ... It was available. ... I declined the approximately $150 protection plan that would have boosted the price of the laptop to the regular sale price ... Then suddenly it was unavailable.
I then went home and called a second Staples store. ... I asked the gentleman who I was transferred to in Electronics if the Acer laptop was in stock. He checked and came back to say they were in stock. ... I arrived exactly 8 minutes later at the location. I walked in and found the exact person who I had spoken to eight minutes earlier. The store was virtually empty. I asked him if I just spoke to him about the Acer laptop and he confirmed that he was the person. I asked him if they were indeed in stock, and he indicated that they were. I then asked if he could please go get one, because I definitely wanted one. And then, before he goes back to get one, he asks me if I want the service plan ... "No thanks ... I went over this all at the last store, I know what it covers, and I am not interested." ... He said 'fine' and walked away. Two to three minutes later ... he walks back and, just like the last store, the inventory suddenly has vanished.
Several Staples employees confirm what this story and others like it suggest: that the company's upper management expects store managers to tell employees who are unable to sell $200 worth of add-ons to tell the customer that the computer is not in stock.
The policy is called "walking the customer," Shah told Segal.
For decades, goal setting has been promoted as an effective means of managing and directing employees. Goals work well in many contexts, but it is critical to think about - and to notice - their broader impact. In particular, organisational leaders have a responsibility to think through the indirect effects of goals, such as how a policy such as Staples's could affect customer satisfaction.
The problem of leaders failing to notice the indirect effects of organizational policies is hardly new. In the 1960s the Ford Motor Company was losing ground to foreign competitors as the market turned to smaller, more fuel-efficient cars. CEO Lee Iacocca announced the goal of producing by 1970 a new car that would be under 2,000 pounds and cost less than $2,000. To expedite the development of the Ford Pinto, managers pursued this target at all costs, including signing off on unperformed safety checks. In an effort to cut corners, engineers placed the fuel tank behind the rear axle of the car in less than ten inches of crush space. Lawsuits later documented that it should have been obvious this design could cause the Pinto to ignite upon impact.
Reprinted by permission of Simon & Schuster India. Excerpted from The Power of Noticing. Copyright 2014 Max H Bazerman.
All rights reserved.
All rights reserved.
Max H Bazerman
- Max H Bazerman is the co-director of the Centre for Public Leadership at the Harvard Kennedy School and the Straus Professor at the Harvard Business School
- He has taught, advised companies, and consulted to governments in 30 countries. Bazerman has received an honorary doctorate from the University of London, the Life Time Achievement Award from the Aspen Institute's Business and Society Programme, and the Distinguished Educator Award from the Academy of Management
