This post at Startup Models is on point, especially the ideas of A. Paying commissions when the cash arrives, not when the deal is signed and B. Making sure the sales goals are in line with what is good for the company.
A story from a Supply Chain friend that is an example of B gone bad:
My friend gets hired by a fabric company to figure out what is wrong at a plant that takes in white cotton fabric at one end and ships out printed fabric from the other. The problem is that truckloads of fabric are rotting and molding in the Southern heat before the fabric can be brought into the plant for printing. Millions are being wasted annually.
But the printing plant is running 24/7. Supply Chain friend sees nothing wrong with the printing plant- it's at full capacity, using good workflows. The problem isn't there.
So my friend visits the plant up the road that makes the fabric which then rots in the parking lot of the printing plant. It, too is running 24/7, cranking out fabric as fast as it can. Fabric Weaving Manager is surprised that Printing Manager is having problems getting everything printed.
The problem? Fabric Weaving Manager was only evaluated on how much fabric went out his door. What happened to it down the line was none of his concern. He was being paid a giant bonus for weaving more fabric than the rest of the supply chain could manage. Waste of raw cotton, waste of fabric, waste of cash. The company thought it had the right incentives in place (High Output = Big Bonus), but the incentives had too narrow of a scope- the one plant. If Weaving Manager was paid based on output AND the profitability of the printing plant down the line, he would have incentive to weave the amount of fabric the printing plant could handle, rather than weave 24/7.
One well-intentioned goal resulted in expensive losses. Incentives need to have multiple factors to avoid unintended results.
Friday, September 23, 2011
Tuesday, September 20, 2011
I think the Netflix spinoff Quikster is an example of taking a business model too far. I understand the instinct to try and separate the business units, especially when one is growing long term (streaming) and the other will fade away (DVDs through the mail). But Qwikster is only going to confuse and tick of current customers. Netflix has done a brilliant job of making itself the go-to destination for entertainment, and users (like me) actually liked the deep catalog of content. I didn't really care if I had to wait a few days for a DVD to arrive if it was the only way of getting it. The wait was a fair tradeoff for the selection. Now I will have to go to a separate website for DVD content- giant pain. I realize businesses have incentives to chase off lower-margin customers, which DVD viewers surely are compared to streamers- but this is perverse. Consumers like the bundle. They don't care that the local cable company has TV, and internet, and phone- but they like one bill and one tech support number. Netflix is going the other way. While Qwikster makes sense on paper, it will hopefully be a disaster in reality. But given the lack of good alternatives, I will experience the Qwikster disaster first hand. At least I'll have much to blog about.
Monday, September 19, 2011
Thursday, September 15, 2011
I shake my head every time someone is surprised that putting three layers of management between the client and the person doing the work leads to an outcome unlike what the client had imagined. Let the worker bees talk directly to the client. It's faster, reduces the conversation in general, and makes the client happier because things get done the first time.
Monday, September 12, 2011
It is easy to grasp the idea of "Failing Quickly": to push yourself or your product into new places, which reveal the areas that need improvement. The hard part is dealing with the failure itself. It's no fun. Embracing something we instinctively avoid feels odd, awkward, strange. Yet it is necessary, as it peels back the veneer we place over everything we touch to get at the gooey messy middle. It's where the growth come from. But to stand over your failure and passively analyze it as a dispassionate observer takes tremendous courage, courage more easily directed at more trivial things. The good news is that careful study will lead a positive feedback loop, steady improvement, and less pain when examining the latest failure.
Wednesday, September 7, 2011
Some jobs require a degree from an institution that gives some hint at the work you are capable of. A lawyer from an Ivy will get a higher starting salary than similar lawyer from average public university in part because the Ivy will be expected to generate more work, at a higher rate, than the average. That may or may not play out over time, but that's the theory. But many careers lack certifications. My career path long ago stopped being about where I went to undergrad and is now all about the work I've done, with whom, the revenue it has driven, etc. Many are crossing over from photography and print, using their unique skill sets to make the marketplace more varied and interesting. Few care if they went to an Ivy or are self-taught. Credentials are fine, but at the end of the day the question is: "Can you do the work?"