Common goal and incentive structures in large companies

In small companies, keeping a common goal is simple. There is probably only one product and hence product goal equals company goal. Messing up incentives is hard (but of course not impossible) as people should be rewarded for making that single product more successful. For increasing sales, improving the product or making it more stable.

In small companies people are also more aware of what each other are doing. It is harder to be totally disconnected between the different departments, if there is even enough people to distinguish between an individual and the “sales department”.

But once companies grow, once there are more products and departments, then issues surrounding cooperation and goals seems to arise. People start pointing fingers.

Salespeople point fingers at development for not being able to deliver on a sale they have made, which happened to include some changes to the product. Development points fingers at sales for not consulting development during the sales and contract phase. Customer support points fingers at sales because they feel overwhelmed by the additional work brought on by a new contract or sales points fingers at them for not delivering a good enough customer support experience to be able to sell to others etc. etc. etc.

Perspective

People see the world from their perspective. And people do so because that is what they are measured on or what they are rewarded for.

Salespeople are rewarded for selling. And if that is all they are rewarded for or measured on, then that is what they will do. They will apply all their energy and cleverness into making a sale. In extreme examples – at whatever the cost.

Customer support is probably measured on either support tickets or time to resolve them. Perhaps even something as fluffy as “customer satisfaction”.

But just seen from these two departments, what does a new contract with hundreds of customers mean?

Seen from a sales perspective (and others as we will get to) it is a success. New customers probably leads to bonuses – so from sales this is a win.

Seen from the customer support department though, new customers will most likely result in more support tickets, as new customers knows less about the product. It will probably also take longer to resolve these for the very same reasons. This will impact the key performance indicators(KPI) negatively for the customer support department and hence probably affect the bonuses here as well – but in a negative way. It could also lead to a need for new hires, which would affect the budget for customer support – again negatively – and you probably get my point – from customer support this is a loss.

Seen isolated from the customer support department new customers is a net negative as it potentially subtracts from their overall performance.

This could also be seen from the IT operations or development department. If they rushed through building a system to support a new product or sale, but in doing so had to cut corners to meet a deadline, which would keep it from scaling efficiently to larger customers in the short run. Then if the sales department suddenly lands an additional new big customer, then this could seriously impact IT in the short run and potentially the entire company over time. If the new customer suddenly finds out that what the sales department promised as a complete and polished system, in reality is anything but.

Generally new customers should be regarded as a positive. They should not be acquired at any cost and they should be in line with the overall vision of which markets the company wants to serve. But within these barriers new customers should be seen as positive from all departments.

So this of course leaves the question – how can we work towards that?

Alignment

Let’s start by looking at what happens when a company grows.

In small companies almost everyone knows each other, what each person does and what is most important for the company. In other words everyone is aligned, involved and responsible. If you are about to make a decision that goes “against” someone else, then you will probably get a reaction directly. So you do not make narrow self-perpetuating decisions that negatively affect others unless absolutely necessary.

When a company grows it risks losing this alignment. As more people join, managers are added and departments form. These departments will hopefully start out as aligned with the overall vision and goal for the company, but over time they risk growing “walls” around them as more people are added with potentially narrower focus. If you top this up with bonusses or KPI’s that open up to “local gaming” – then you have set out on a path of divergence.

Via negativa

Saying exactly what to do can be hard and may even miss the point. You can clear the path by inverting the premise.

“Via negativa” – so to speak.

A lot of problems that have no clear answer, can be attacked from the opposite. By looking at what not to do. So instead of trying to solve the issue of alignment head-on, we can instead look at what works against alignment.

First of all; narrow-focussed bonusses and KPI’s. If these are set up to favor “local” over “global”, then it is only a matter of time before they will be gamed and cause more harm than good.

Secondly; keep the different departments close together. When doing a new sale, make sure that representatives from both IT development, operations and support functions are involved. This does not mean that everything should be stalled because noone can agree. Let everyone be heard and then have a clear understanding of who makes the final decision.

Likewise if IT development had to cut corners or have a fragile offering, then let the other departments know. If you have not let them know then you cannot expect them to consider it as part of their decisions. If you cannot have an open minded discussion and expose your weaknesses departments in between, then you need to fix that ASAP. You can never work towards a common goal without full honest view of each others strenghts and weaknesses.