The round robin format of the badminton games at the 2012 London Olympics ended with the disqualification of teams from China, South Korea, and Indonesia from the knockout round. Instead of exerting themselves to play their best, the teams were trying to lose on purpose so that they would be advanced to play against the lesser teams before meeting the powerhouses. While it was dreadful to watch, the tactic seems to have worked for other world badminton tournaments. Unfortunately, the strategic losing cost the teams dearly.
We learned a big lesson from the kerfuffle: you get what you ask for. The round robin format incented the competing teams to game the system to place them in a better position to get to the gold medal round. They didn’t break any rules but their action contravened the competitive spirit of the Olympic Games.
If you compensate sales people on revenue, closing sales is top of mind. If you compensate call centre reps on the number of calls answered per hour, ending calls as quickly as possible is the natural response. Customers might not be served in the most satisfactory manner. Behaviour shifts with the focus of your compensation system.
To drive the behaviour you desire, there are several things you need to consider when you design your compensation plan:
- Understand the outcome—articulate the specific end results you want
- Anticipate the response—think about what actions would be triggered, both the desired positive actions and the potential undesirable actions
- Assess risk and impact—determine if any undesirable actions would create negative impact on the customers or the company
- Recognize spill-over effect—consult with upstream and downstream teams to evaluate impact
- Incorporate rules—design rules to minimize the impact of actions that might jeopardize outcomes
- Communicate plan—convey with clarity on the desired outcomes, goals and rules
Be prepared to tweak the compensation plan to adapt to evolving business focus. Compensation is a sensitive topic. It requires deliberate and careful considerations.
© Connie Siu 2012. All rights reserved.