It happened again the other day.
A (fairly articulate) participant in one of my workshops said:
Charlie, you don’t understand our system. We can’t do the trust stuff you suggest when the incentive system is set up the way it is. We get paid on the basis of the transactions we bring in and close; we are incentivized to focus on the next deal, and to maximize our individual contributions. While no one would call it this exactly, it’s eat what you kill and kill what you eat. You can’t ask us to behave against our own interests just to be nice.
In fact, until leadership takes this seriously and changes the incentive system, this is really all very high-sounding, but you’re not going to see collaborative, long-term client-focused trust-based behavior around here. Not when it’s in our best interest to behave otherwise.
If you’re nodding your head to that argument, and think it makes sense, listen up – this is for you.
That thinking is dead wrong. And not for some ethical or happy-trust-talk reason. It is a misreading of the very incentive system you think you are responding to. If you are buying that line of argument, you are sub-optimizing by shooting yourself in your own foot.
The Problem is Not the Comp System – It’s You
There’s nothing wrong with a comp system that pays by results, and that apportions pay for accountability. The problem is in you interpreting that system wrongly. You are the one making a hugely false inference, namely:
Believing that the way to optimize short-term performance is to operate from a short-term perspective.
The truth is – and it may be obvious when I put it this way – the real way to optimize short-term performance is to consistently operate with a long-term perspective.
- The company that changes strategy every quarter has no strategy at all;
- Repeat customers are hugely more profitable than high-churn new customers;
- We trust people who have our best interests at heart; we distrust those who treat us as one-off transactions.
Let’s connect the dots. If you think that because you get paid by the transaction in short time periods you must behave transactionally or in a short-term timeframe, you are sadly deceiving yourself. You are announcing to your clients – and to your fellow team-members – that you are not interested in long-term relationships, or in doing what’s right for them. Instead, you are focused on maximizing your own short-term financial interest. And they will respond accordingly.
The paradox is – because of your unenlightened focus on the short term, you are actually sub-optimizing your own short term performance. Long term client-focused behavior manifests in an ongoing display of superior short term performance.
A golf metaphor: don’t focus on hitting the ball – instead, just let the ball get in the way of your swing.
The Solution is not the Comp System – It’s You
One of the great things about trust in business is that it’s far less dependent on top management actions than are other cultural or systemic issues. Trust is very much within range of your own freedom of motion. You do not have to wait for the CEO or the compensation committee – you can act on your own, starting right now.
Resolve to yourself that:
- You will do what is right for your client’s long-term interests – period;
- You will treat your partners as if you, and they, will be partners forever;
- You will do what is long-term right for the firm, not just what is right for you in that moment;
- You will look at your quarterly performance numbers as a time series – not as a disconnected set of discrete events.
If you do that, here’s what will happen:
- Your clients will stay with you, refer you to others, stop pushing back on price, ask you about follow-on work, etc.
- Your colleagues and partners will seek you out, bring you into deals, and help you with your own;
- Your firm will note that you, as opposed to the Selfish Others, are actually helping the firm.
And most important of all – your income will go up. Not down, up. Because your short term income is maximized if you consistently behave in others’ long-term interest.
Move that gun away from your foot. Now put it away entirely. Doing the right thing pays; not because the world is a happy-talk place, but because in the real world, clients and partners reward those who play the long game – not the short game. And pretty quickly, the short game improves as a result.