As I mentioned earlier, one of the main problems in management is the inability to see the cause behind the forest of symptoms. Here’s an example.
There is a Western division of the company that is performing well. In another region, the Southern division, the results are not impressive. In both divisions, their leaders receive salaries, and the company has the administrative ability to increase or decrease these salaries.
What comes to mind first when faced with such a situation and holding such a tool? That’s right. Cut the slacker’s salary to teach them a lesson. Either they’ll quit on their own, making way for someone more successful, or some kind of psychopathic program will kick in, and they’ll suddenly deliver outstanding results, vying for the restoration of their salary.
Well, a reasonable manager wouldn’t count on the second option. But we’re not talking about reasonable managers. A reasonable manager would first try to understand the reasons behind such a situation, considering that people are, in theory, roughly the same, and labeling one of them as negligent is just an attempt to stick on a label, an all-explaining excuse that will fall apart after the first “why.”
In reality, it turns out that what was devised in the central office to reward field sales representatives—those who directly interact with distributors—doesn’t work. The central office believes that sales representatives shouldn’t be paid a salary and can work solely on commission, while in the regions, they understand this but are tired of arguing that a person who knows their worth wants to receive money immediately. The central office sees that the success of regional directors varies across different regions and thinks it’s a matter of the people involved. In the regions, they nod in agreement, but… they end up supplementing the sales representatives’ pay out of their own pockets. As a result, regional managers are already counting on their bonuses rather than the salary that is allocated for the material incentives of the sales representatives.
It’s never going to be possible to centrally manage things like stimulating trade representatives in large companies with a “bunker syndrome.” There are vast opportunities for fraud, and with the presumption of distrust that the central office nurtures towards the regions, one can’t even dream of allowing those at the bottom to decide who to reward and how. This distrust is mutual. The regions also don’t trust the central office, as the central office can cut their salaries at any moment, change the incentive system, or fail to deliver products, among other things. Yes, the relationships were set up incorrectly from the very beginning, and this mutual paranoia is a separate issue that needs to be addressed on its own.
So, we have a situation where the salary of the regional representative is being used to incentivize sales representatives. Who can pay the sales reps more? That’s right. The one with more money. This means that cutting salaries won’t have a positive effect on the region’s performance. But why do some regions do well while others struggle? If we take a closer look and think back, we’ll find that the warehouse in the unsuccessful region is rented from a well-known network landlord, while in the successful region, it’s rented from someone whose last name oddly matches that of the regional representative.
In the end, we come to the conclusion that a star emerges, whose true motives for working are unknown to the central office. I meant that this star considers her salary to be meager by her standards. After all, the true motive for this star’s work is to have a great tenant who pays a decent amount of money out of habit. Why out of habit? Because a few years ago, the regional representative was allowed “as an exception” to rent a warehouse from himself in exchange for a nice kickback. The person who was receiving the kickback has long since been fired, but the rental payment remains, and now, as long as sales for this regional representative are going well, no one in the central office will think about closing the representative office and the warehouse.
All the ideas from the central office to lower the rent are based on unverified legends that the location is well-established, that there are no other good warehouses available for reasonable prices in the region (here’s a selection of rental listings), and that the landlord is unwilling to lower the price. No one wants to touch the “Star Region,” and ultimately, this regional manager is an authority in the company, as he supposedly possesses the secret keys to the sales organization.
A very telling example of how one mistake leads to another, resulting in a cascading epic fail. First, they allowed a conflict of interest and permitted self-rental. Then, they nurtured a bribe-taker, and forgot about it when they fired him. After that, they punished an innocent person, stripped him of his last sales incentive, and set him on the path to job hunting. Next, they will spend a long time looking for a new regional manager, paying fixed costs for the regional office and warehouse with no results at all. Then, they will pay recruiters, and ultimately, all the results from the “star” sales will go to a vampire in the form of unreasonable rent and mega-bonuses for super success.
You reap what you sow. If we look at the upper management level and the motives of the National Director, even if he suddenly finds out that almost all the “star” regions are blatantly cheating, he will already be “in the scheme” one way or another, because his bonus and career are important to him too. He won’t want to fight for the truth, and at most, he will just amplify the paranoia of distrust, repeating day after day House’s mantra, “Everyone lies.” Moreover, running to “open people’s eyes” would be too risky for him. The first questions shareholders will ask are: “Why did you allow this?” and “Why didn’t you discover it earlier?”—which essentially formulates the grounds for the National Director’s dismissal. It would only be right to fire him because only a new National Director could easily tackle the situation without being “in the scheme” yet.
Moral: When analyzing the sales performance of your retail chain, ask yourself the question “why are sales poor there” after you have asked “why are sales so good elsewhere.” Analyzing the motives and actions of the star performers will provide more food for thought and yield better results for the company. The practice of “if it ain’t broke, don’t fix it” is not applicable here.