Most executives don’t even like to broach the subject unless it involves the payout.  Some claim it is OK, because everybody does it.  Still others say it is the only way to motivate people or be profitable.  What is the subject . . .  incentives through rewards and bonuses.

Having worked with many service companies over 16+ years, I have seen many flavors of incentives.  But working with the Vanguard Method with its focus on customer has risen my awareness of the damage incentives cause.  Over and over again the same damage is done.

The incentive becomes the focus (or what John Seddon calls a defacto purpose and I call faux targets) of organizational and individual efforts.  This thinking works to reduce the value that customers seek from service organizations.  Service companies can not serve both themselves and the customer, there can only be one master.

In the US, we have seen the destruction of wealth by some in the banking industry that had the wrong focus.  The price these companies should have paid is death, but the bailout saved them.  Now many are back to the old “business as usual” with bonuses to keep the good people (good people needs a redefinition).

Break-fix companies like plumbing, HVAC, auto repair and others that I have worked with over the years believe that they could not achieved their success without such incentives.  However, visits to customers show that they are guarded about what they are being told as inconsistent advice is given, or worse, repairs or replacement is done when not needed.

Too many owners of break-fix organizations turn a blind-eye to the reality of the damage their incentives bring to customers.  Since most in any given industry prescribe to the same thinking that incentives are good, you rarely can find anyone doing anything different.  It is the norm . . . but a norm that needs to be challenged in the face of the evidence.

In the case of the banks, the whole world is the poorer for wrong focus.  For the rest, customers pay the price as bad service leaves them with software, furnaces, repairs that are not needed.  If it wasn’t so accepted by so many, most would see it as fraud or a scam . . . many of their customers do.

The one counter-intuitive point that I have learned is that when the customer is the focus of our organizations, costs fall and revenue increases.  Think about it . . . no monitoring for cheating, no HR and accounting spreadsheets to track and happier customers.  Marketing budgets are reduced as better service replaces the hope of better service.  Innovation increases as the service organization focuses on how to provide better service.

With incentives, we call into question the integrity of the organization in the customer eyes.  It is the last of the dirty little secrets.

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.