Poor Richard's Junto: management science, entrepreneurship, business ownership, management

This blog dares leaders to do better. We encourage those managers with the wits to change and we exchange ideas in management science to mutual benefit and personal development. This is the place for those leaders who admonish folly and hubris and yet are devoted to continuous mental development, entrepreneurship, business ownership, & business management. As such, let this be a forum for thought leaders, CEOs, and business owners as Ben Franklin once did with the Junto and his almanac.

If two men exchange dollars; each man stands to gain a dollar. However, let these men exchange ideas, and each stands to gain a fortune.

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Thursday, January 27, 2011

Inverse; Always Inverse!

Pick up a fantastic new tool for your management tool box by reading this fascinating case study. I’m going to walk you through a familiar scenario found in Corporate America to demonstrate how well intended actions of leadership can go bad! If you've ever encounteered ivory tower syndrome and cynical employees, this is a must read.  Upon conclusion of this thought-provoking case, you’ll have an awakening to a new tool, the power of inversion, which will enable you to unleash the internal motivations of your employee base.

Scenario: A new leadership team is tasked with revitalizing sales for a division that suffered severe setbacks because of the recent challenged economy. As a result of the economy, the vast majority of employees are not presently qualifying for earning commission.  Taking the pulse of employees, leadership finds that the sales staff is unmotivated due to an unsatisfactory incentive program. The key short comings the employees identify are that the plan is too complex, that commissions are limited due to caps, and there is a limited group of products sold by staff that is considered eligible for commission.

Leadership’s Response: The leadership team takes the employee concerns to heart and quickly addresses concerns by developing a rough concept of a revised incentive plan. The cornerstone of the new plan is to pay commissions on a percentage of revenue generated by new sales on a wide variety of products. The plan is simple, transparent, and has higher caps. However, because budgets have been compressed due to the industry’s environment, leadership made some minor provisions by increasing the threshold to qualify for commissions. In short, employees can earn more, but they are required to bring in more. Leadership assumes this modification is a reasonable necessity to conserve margins. Excited to share the plan to quickly improve morale, management prepares a presentation and calls together an all staff meeting to share how the plan will come together.  The leadership team took on the core issues, came up with a perfectly linear logical solution, and announced the new plan with the expectations that it would be very well received. As such, leadership congratulates themselves on a job well done.

The Problem:  The plan was not well received. Salespeople were further discouraged and viewed new leadership as being aloof to their needs and concerns. What went wrong? Management was responsive, quick, and well intentioned. Faced with the pushback from employees, the leadership team questions whether or not they have the right employee base. Employees think management couldn’t manage to find their butt in the dark with two hands and a flashlight. Thus, the ivory tower syndrome is reinforced.

The Solution:  How could this predicament have been prevented by leadership? As Charlie Munger says, “Inverse; Always Inverse!”  Linear thought will only get you so far. In this case leadership asked, “What can we do to make employees happy?” Inversion works by asking, “What can we do to upset our employees?”

Application of Inversion:  Had leadership asked “What can we do to upset our employees?” they might of come up with some of the following:

  • We can increase quotas against the backdrop of a challenged industry environment.
  • We can approach the incentive plan in isolation rather than evaluating a global and comprehensive set of solutions anchored to the realities of the competitive landscape.
  • We can neglect to offer promotions, advertising, or other required marketing support to assist in meeting the increased quotas.
  • Through newly offered transparency – we can show employees that their new increased threshold to qualify for commission is four times their annual base salary without any due consideration to how it may be perceived.
  • We can neglect to pay employees any commission unless their threshold is met. In other words, we will have employees sell products without so much as a $10 Starbucks gift card for a closed deal. We will also offer no certainly that any commission will be paid for any products sold until they start selling products beyond their threshold - near the end of the sales period. (A demonstrated ignorance of Pavlovian response and basic human psychology)
  • We can announce a new incentive plan by presentation prior to having any official written documentation available for employee review, critique, and implementation.
  • We can assume that the plan will be well received and only offer to answer clarifying questions on the plan while neglecting to offer any feedback loop for concerns or creative input.
  • We can come up with incentive solutions benchmarked to our competitor’s offerings while not applying appropriate weighting to competitor market dominance, marketing support, or value proposition.
With proper leadership brainstorming and employee engagement in the process, an inversion exercise as above can be quite revealing. The main premise of inversion and its core power of rooting out false assumptions are rather apparent when distilled to a simple logical expression as below:

All dogs are named “Spot”.  Is “Spot” a Dog?   Answer:   No, not all “Spot”s are dogs.

When inversion is expressed this way, it’s easy to see how assumptions are avoided from its practical application.  Many things in life are a matter of perspective; and those perspectives often have assumptions built in. A person can be viewed by others as a procrastinator while in their view, they think they are quite productive as they mutter to themselves, “I’m fascinated by my work – I can stare at it all day!”  Joking aside, if leadership in this hypothetical scenario used inversion in their process, they could have proactively avoided many missteps and set up the appropriate systems to deal with any unforeseen consequences of their actions.

Inversion; a Cornerstone of Leadership:  When leading others, it is very easy to get caught up in our objectives and timelines. As leaders, we push ahead -we execute -we get results. Consider what constitutes a skillful politician - staying on point and communicating their agenda; a linear objective. President Obama is a masterful politician but, both parties have accused him of being stoic and of losing some of his charisma as of late. What if he practiced inversion and asked himself, “What can I say to upset my audience?” Or, “What can I omit to disenchant my supporters?”  Perhaps such questions could have guided President Obama in the 2011 State of Union address to have been more effective in instilling a sense of confidence and security into demoralized citizens in search of leadership. Political affiliations aside, look at how President Ronald Reagan could unite a nation and make an unarmed man with an adversary’s gun to his head feel like he he’s the one with the advantage in this statement:  “Above all, we must realize that no arsenal, or no weapon in the arsenals of the world, is so formidable as the will and moral courage of free men and women. It is a weapon our adversaries in today's world do not have.” I don’t know if President Reagan used inversion per say; but he certainly set time for reflection. Become an inspiration to others and adopt the practice of inversion.

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