Tuesday, February 26, 2013

Reengineering the Corporation

The term "reengineering" came in and out of fashion a decade or so ago, as it was ushered in with much excitement as the next big thing and faded when it didn't seem to produce any real results for most of the firms that jumped on the bandwagon.   I didn't pay it much attention at the time, but Hammer and Champy's recent book on the topic got me thinking that it might be worth revisiting.

Their concept of "reengineering" is next of kin to innovation - and innovation seems to be headed in the same direction: it's very fashionable to be innovate, so firms are plastering the label of innovation on anything they want to grant an aura of importance, and many things that are not innovative or important at all.  This makes the older trend worth a second look.

Fundamentally, reengineering is about changing the way an organization operates - considering the outcomes it is attempting to achieve and asks the question "why?"   In some instances, the answer to that question demonstrates that the goals of an organization are not at all in line with its mission, and that the tacit acceptance of their importance often fails to stand up under scrutiny.

After whittling down the objectives to those that make sense, reengineering starts from a blank sheet of paper to consider how they might be efficiently achieved, regardless of current resources and practices, considering possibilities rather than tradition, and often discovering that their existing operations have been mired in decades-old rituals that no longer make sense, and procedures that have become bloated over time.

All of this sounds a lot like what is currently being billed as "innovation"  - only it's a far more systematic and deliberate approach that is likely to yield more practical results than merely pipe dreaming of gazing longingly at the latest bells and whistles and trying to imagine how they might be useful.

Said another way, reengineering is a process for innovation, and innovation results in reengineering.  As such, it's likely worthwhile to see what can be learned from this older approach to achieving the same goals - if not to salvage innovation, then to be prepared for whatever term comes in to fashion the next time around.

Friday, February 22, 2013

Prospect-to-Customer Transition

I'm mulling over two contradictory arguments about how to manage the experience when a prospect becomes a customer - there seems to be some merit to each approach.

One argument favors a consistency of experience, on the reasonable assertion that when a prospect makes a purchase and becomes a customer, the experience he had during the buying process sets expectations that must be met in the period of ownership.   Any difference between the two results in cognitive dissonance, though if the customer experience is better than the prospect experience, it is a pleasant surprise rather than a disappointment.

Another argument suggests an evolution of experience, on the likewise reasonable assertion that a person who is considering purchase is experiencing different emotions (anticipation) and considering different factors (cost) than a person who has already purchased the product.  As such, there must be an evolution of the experience to be appropriate to the situation in which the prospect-then-customer finds himself.

I have generally leaned toward the argument in favor of consistency.  It seems sensible and far more practical to have a unified sense of a brand that appeals both before and after the purchase event - and especially considering that a customer who has purchased is a prospect for another sale (a cross-sell or a restock), it seems sensible to court that state of mind consistently.  But I can't deny the sensibility of the second argument, especially since the period of ownership is longer (depending on the good in question) than the period of anticipation prior to ownership, and is likewise different in its nature.

It is also more likely that a prospect-specific appeal, as opposed to the consistent appeal, is more adaptable.   That is, if you have a consistent experience, you likely make the assumption (and possibly the mistake) that the same things that cause a person who has experience with your brand or product will be appealing to a person who has no experience with it - the reason they make the purchase is to transition themselves to the happy end-state in which a current consumer exists.

Meanwhile, you are limited to appealing to a specific market segment - that which matches the customers you already have - and relying on the body of prospects to reason for themselves that consumership is a desired end-state to achieve.   If you instead consider the prospect to be different to the customer, you can have a singular ownership experience, but tailor appeals to the specific interests of prospects, who may bring different desires or expectation than your present customers - and moreover, once they have purchased the product and experienced ownership or consumption, it is likely that the expectations of prospects will align to those of consumers.

I don't think there can be a full resolution - though I suspect that there are certain areas of overlap.  That is, some expectations are exclusive to the prospect, others are exclusive to the experienced consumer, and a third set is common to both groups.   So long as the area of overlap is sufficient, it is likely that this will enable prospects to transition into consumers, shedding prospect-exclusive interests and adopting consumer-exclusive ones, with the common factors to facilitate their evolution from one to the other.

All of this seems abstract, and in attempting to concretize it by way of an example has done nothing to resolve the differences - what I've arrived at is the notion that it depends on the idiosyncrasies of a product and the manner in which it is used by a given customer segment.   Some products seem to lend themselves to the consistent strategy, others to the evolutionary strategy.

The only generalization I feel safe making at this point is that the duration of ownership experience is likely a factor.   For products that are consumed quickly (food items, for example) consistency of the prospect and consumer experiences seems to be the better course because the short duration of ownership does not provide ample time for the prospect/consumer to change his expectations, whereas products with a longer period of ownership (an automobile or major appliance) provide, and perhaps even require, a transition to be made because the product will remain in the owner's experience long after the experience he had as a prospect is forgotten.

Monday, February 18, 2013

Cost, Convenience, and Loyalty

I stumbled across some notes from a couple of very informal experiments - Marketing 101 type of stuff - that got me think about the way in which we consider brand loyalty.   In brief, discussions on the topic tend to take too binary approach, suggesting the customers are either loyal or they are not, with little room in between.   Some refinements to that theory are measurement of share of wallet, or calculating the percentage of the time a customer buys a given brand when they buy a particular product.   I think those are closer to the mark.

But before I digress further ... the first study looked at scanner-panel data comparing the sales of the two major cola brands (need I even name them?) to demonstrate that when the price of one was as little as a dime less than the other, a significant number of customers purchased the cheaper brand.  This suggests loyalty does not exist for a large number of customers, as they buy whatever brand is cheapest.

That much is very well known, but what the researcher also considered was that the price of generic or store-brand cola did not seem to waiver - even though, in blind taste tests, the results are clearly random, and in spite of the fact that consumers are well aware of this, there is still loyalty to the two major brands - a person may switch from one to the other, but never to the generic cola, even though there is no perceptible difference in product quality.

The second survey was completely new to me: it was an informal study that posed two questions.   First, if you went to a restaurant that did not sell your cola of preference, would you leave and go to one that did?  84% indicated they would not do so.   Second, if you went to such a restaurant with a friend, and they did not serve his preferred brand, do you think it would be reasonable to expect your friend to accept whatever was on offer, contrary to his preferences?  88% indicated that they thought this would be a reasonable expectation.

This sparked an idea: that it is likely loyalty to brand has much to do with the consequences of switching, primarily the negative consequences in terms of effort or inconvenience rather than price.   And this is likely best considered in degrees.
  • If the two choices are side-by-side on a supermarket shelf, it is very easy to switch from one brand to the other.  Zero inconvenience, for all intents and purposes.
  • If the supermarket were out of a customer's preferred brand, this means they would have to drive to another store to get their preferred brand.  I don't think any surveys or experiments have investigated this, but I expect consumers would take whatever was on offer for that trip.
  • While deciding which restaurant to visit, a customer might take into account whether it serves his preferred brand of soft drink.  But I expect that in most cases that other elements of the meal figure more greatly than the beverage, so I likewise expect a person would compromise on brand rather than go to two different places to assemble his meal.
  • By the time the customer has been seated in a table, he has already invested considerable effort into getting there, and if his preferred brand was not on offer, chances are slim he would leave rather than accept another brand.
  • Add to this a social element: if a person is seated with a group of friends, and the choice to go to a different restaurant meant leaving his companions behind, there's even less a chance he would do so to be loyal to his preferred brand.
  • And to turn the pressure up a little further, if a customer had brought his family, spent some time corralling the kids into the place and getting them seated and relatively calmed, leaving to go to another place that served their preferred brand would require a great deal of effort.
It also occurs to me that all of this is likely quite obvious, and I might be a little embarrassed at spending even this much time poring over it - except that marketers keep doing studies on the topic, so at least I am not the most tedious person on the planet.   But just because something is painfully obvious doesn't mean that it is taken into consideration.

And that gets back to the point, when I still seemed to be making one:  measures of loyalty seem to assume that customers must be fiercely and absolutely loyal to their brand of preference, in spite of the incentive that a competitor might offer them to switch, and in spite of the non-monetary costs that they will have to undertake in order to remain loyal to a given brand.

With that in mind, simplistic measures such as how often a customer purchases a brand, or how much of their budget is spent on one brand versus another, seem woefully insufficient to explain the degree to which customers have brand loyalty.  It remains a phenomenon that stubbornly defies quantification.

Thursday, February 14, 2013

Make or Steal?

I’m apprehensive about the practice of pursuing market share by stealing away the best customers of your competition.   It’s a common practice - but it is based on the assumption that good customers (those who buy the most and require the least support) are available and inclined to be taken away from the firms that are currently serving them.   I have the vague sense there’s something fundamentally wrong with that assumption, and am trying to work it out.

I can’t disagree that having good customers is a benefit to the brand, and it seems only natural that a brand would want them – but the tactics they use to obtain them seem shady, in an ethical sense.  I have the sense that a good customer is developed over time – it’s not innate.  People aren’t born valuing products, understanding the way they relate to their needs, knowing how to apply the one to the other, and aware of all the various rituals around obtaining, employing, and replacing them.   These are learned behaviors, and they are learned because they are taught.

In grammar, the passive tense is a sign that the action is known but the actor is not clearly identified:  that is, to say “they are taught” means “someone teaches them” and we know not whom.   I would propose that in many instances, supply instructs demand.   A prospect who does not recognize their need must be taught to recognize it; one who recognizes their need but does not know how to solve it must be taught that a given product will satisfy their need; one who has made the vague connection between product and need must be taught how to obtain it and how to use it properly, i.e., in a manner in which the need will be efficiently satisfied.

Some of this teaching occurs through advertising, but even more is taught through customer support: the supplier demonstrates how the product should be used, instructions are provided in the box, and there is a toll-free number for questions or additional support.   It takes a lot of work to teach a prospect to become a good customer … wouldn’t it just be easier to steal one that a competitor has made?   That seems inherently flawed - but because the practice of stealing customers, by firms who are too incompetent and/or lazy to make their own, seems to be very widespread, so much so that they are likely to respond “so what’s wrong with that?  Isn’t that what everyone does?  It’s just the way business is done.”

"I'm just doing  what others do" has never been a valid defense of ethics - and it gives rise to the tragedy of the commons: you can steal good customers only if someone out there is making them – but when the vast majority of firms focus on stealing customers, few (and in some instances none) are making customers worth stealing.  The same can be said in the employment market: many firms complain that there are not “good people out there” who have the skills they need for a given position.  That is to say that they do not develop their own workforce to serve the growing needs of the organization, but hope that someone else is doing so, that they might steal their good employees away.   It’s faster, it’s cheaper, and everyone else seems to be doing it … but it is a parasitic practice that assumes the existence of a host.

For most firms, this results in a great deal of inertia and pessimism: If I work hard to develop good customers and good employees, other companies are just going to steal them away … so why bother?   I’ve heard this distressingly many times as an excuse to refuse to address the problem – maybe not in those exact words, but the thrust of the message is exactly the same.   It's not considered that customers are loyal to the firms that serve them well, and may be a leap of faith that many cannot make.

But on the other hand, that attitude may be an indication that a firm is not willing to take the effort not only to make good customers, but wishes to stop this effort as soon as the contract is signed, and make no further effort to maintain the relationship.  That is to say it is that investment in a relationship is not over when you have achieved your first success: if you want a second success, then a third, then more, you must continue to consider the needs and interests of the other party.  

If you train up an employee but do not pay him what a person of those skills are worth, you will lose him to someone else who will.   If you you train up a customer but do not offer him a price-value proposition that you taught him to seek, you will lose them to someone else who will.   For customers in specific, this is very clearly demonstrated in the level of attention (and sweetheart deals) given to new customers that is not extended to existing ones, who are neglected until they become susceptible to offers from firms who value them more.

Perhaps it’s just the optimist in me, beaten and bedraggled though he may be, that has the sense that there is an end to the vicious circle, and I have the distinct sense that customers and employees are desperate to give their loyalty to a firm that will earn it.   People stay in abusive or parasitic relationships in hope that things will get better, and it takes a lot of discouragement and neglect for them to get to the point that they are willing to abandon the investment they have made and move on.   That hope may sustain a customer or an employee for years, but it is not infinite.

To drag this meandering back to some semblance of a point:
  • There is value in developing customers.  You cannot count on stealing them from other firms, nor should that be your primary strategy because it is not sustainable – i.e., you can’t count on other companies to make customers worthy of stealing.
  • It takes effort to keep the customers you make.   Customers are loyal to a brand that serves their needs, and are generally accommodating and patient of its shortcomings, so long as they have a reason to hope that things will get better.
  • It takes no effort to lose the customers you make.   You can cruise on accommodation and patience, but even that has its limits, and a neglectful firm can break the hearts of those who love it, and send them into the waiting arms of another.
I recognize that common practices in most industries run contrary to these principles, but common practices are not best practices – there are firms that have fiercely loyal customers and employees, so rather than seeking to model yourself after the majority of firms (who get it wrong), you might consider modeling your own behavior after the minority of firms who get it right.

Tuesday, February 12, 2013

Defining Customer Experience

I've been tracking a discussion in which customer experience practitioners are attempting to define "customer experience," which is likely worthwhile because it's a nebulous concept.   I haven't, however, contributed to the discussion thus far because participants are trying to cram as much information into the definition as possible, which is never a good thing.

A definition should be reductive - it boils down a concept to its essence.  Exploring the nuances and implications of a concept requires more than a simple definition.    This exploration is both important and valuable, but it must start with a basic definition of the thing to be explored that can be quickly understood.  The more exploration done in the definition, the less useful it becomes as a definition.

Unpacking the Portmanteau

A concept that is composed of other concepts further complicates the task of definition.   That is to say that in order to define "customer experience" we must first understand the definition of "customer" and the definition of "experience."

That is not always the best approach. If you understand the definition of "hot" and the definition of "dog" you still do not understand what is a "hot dog" and are likely led in the wrong direction entirely.

But in the case of "customer experience," I expect that unpacking it can be useful, as neither of the terms is meant in a figurative sense and the primary focus of customer experience is addressing the literal experience of the literal customer.


I have some reservations about using the word "customer" at all, as it is very restricted and thus insufficient to the practice of customer experience management. In its strictest sense, it means the person or organization that purchases a product.

As practitioners, we attempt to influence every experience by every person who interacts with the brand at any time.   We attempt to influence the perception of the brand prior to and after its purchase, and recognize that this likely involves many people: the person who buys the product is not always the person who authorizes its purchase, not always the person who consumes the product.   And even when it is the same person, we use different terms to indicate different activities in the span of involvement with the brand: they may be a prospect, a shopper, a buyer, a user, a consumer, etc.

There is not a single word in the English language that encompasses all of those roles - and until such a term is coined, we're stuck with the sloppy and nebulous concept of "customer" to include them all.

But at the same time, maybe the traditional definition of "customer" is worthwhile - because when it gets right down to it, the act of purchasing a product is our main objective.   Why is it important for a prospect to have a positive impression of the brand?   Because we hope the positive impression will eventually purchase it.   Why is it important for a consumer to be satisfied by their consumption of the brand?   Because we hope their satisfaction will lead them purchase it again.

Thus considered, it seems to me that the use of the term "customer" is correct after all.    It's not that customer experience practitioners have no concern for people (or a person) in non-purchasing interactions - but that we are essentially interested in their behavior in relation to making a purchase ... which is to say we are essentially interested in them in the role of customer, and their experience in any other role is secondary.  

As such, it can be boiled out of the crucible of definition - when we say "customer" it is implicit we mean all people who interact with the brand at all times.   But at the same time, the fact that these other roles are so often overlooked does seem to indicate a need to mention them specifically in the definition.

Another thing that doesn't need to be stated explicitly in the definition is that "customer" is meant in the singular and plural sense.   We seek to address the individual experience of each customer, and we seek to address the collective experience of all customers.   There are times when this is in conflict (serving one person well means neglecting others), but this too is fertile grounds for consideration in a much longer exploration, which can be done outside of the definition.


The denotation of "experience" likewise seems initially problematic in that its traditional definition is limited to the events that occur in an interaction.   It is a simple, step-by-step narrative of the things that happen, devoid of thought or emotion.

The practice of customer experience management does begin with the mechanical aspects of an experience, but in order to manage this well, we consider things beyond the efficiency of action and are deeply concerned with what customers think and feel during the process.  There are instances in which we sacrifice efficiency in order to comfort the customer - if anything, that is the part of the experience that is most sorely neglected and needs a champion.

That said, I am led to the conclusion that these aspects of the experience that arise while performing the mechanical actions are implicit and do not need to be elaborated upon in the definition of the term.   If the goal is to reduce the definition to the essence, they too can be tossed out, and left for elaboration in a longer exploration.

But again, I have the sense that the thoughts and emotions of the customer are the primary concern of the customer experience practitioner - to toss them out altogether is again to dismiss a critical and often ignored aspect of customer experience.   And until such time as they are understood and accepted, they bear mentioning.

Finally, there is also the disentanglement of the singular and the plural of "experience."   When we speak of an experience, we are focused on a single interaction, but when we speak of experience (without the "an") we are referring to the amalgamation of all singular experiences related to a brand.

Customer Experience

I have the sense that one final reduction must be made: to separate "customer experience" from "customer experience management."   The former is a something that occurs, regardless of whether any attempt is made to influence it, while the latter focuses on the attempts to influence it in a positive direction.   I'd like to consider the latter separately, and focus for now on "customer experience" alone.

To begin, I will start with a virtually useless tautology:
Customer experience is the experience of a customer in an encounter with a brand.
While that is virtually useless (as promised) it does provide the context in which customer experience is considered (encounters with brands)  and, for now, discusses it in the singular because while practitioners are concerned with every customer and every encounter, customer experience itself occurs in a one-at-a-time fashion.

To improve the definition, I will substitute the description of the characteristics of customer and experience, as considered previously:
Customer experience is the impression made upon an individual in an encounter with a brand prior to, during, and after purchasing a product.
I'm generally satisfied with that as a basic definition, one that captures the essence of the term without going into an unnecessary level of detail.   I am tempted to tinker further with three elements of the definition:

  • To explain what is meant by an impression (thoughts, memories, emotions, etc.)
  • To explain which individuals might be involved (the shopper, the buyer, the user, etc.)
  • To remove as unnecessary the "prior/during/after" elaboration 

But I'll refrain from doing so presently - my sense is that it is possible to elaborate further on "impression" and "individual" after giving the definition, but that the prior/during/after must be included so that the definition gives a proper sense of scope.

Customer Experience Management

I set aside the practice of customer experience management before because it is a separate thing from the experience itself, but in discussions among practitioners, the "management" is often dropped.  That's probably not a good thing for the sake of clarity.  And so, a separate definition:
Customer experience management is the practice of seeking to improve the quality of the impression made upon each individual in each encounter with a brand prior to, during, and after purchasing a product, with the goal of increasing the lifetime value derived from each customer.
This repeats much of what was said about customer experience - which is by choice, as a definition that requires a person to look up the definition of the explanation is vexatious.   It also shifts from the singular to the plural, because practitioners may work on the specific experience of a specific customer at a given time, but are more concerned will all experiences and all customers.  Further, it defines the occupation by indicating the immediate task (to seek to improve) and the ultimate goal (increasing lifetime value).

A Work in Progress

Finally, it's worth mentioning that this is a work in progress, developed for the sake of focusing my own understanding of the concept, and it will likely evolve as my understanding improves - but as it speaks to the essence of the concept, stripping away the unnecessary filigree, I have a sense it may stand.

Sunday, February 10, 2013

Contractors, Agents, and Other Spies

Industrial espionage is not a thing of the past.  It's alive and well, and happens every day, and is so common a practice that it has become institutionalized and accepted.   Firms regularly hire agencies to gain access to the privileged information and strategic plans of their competitors, and others hire agencies to gain access to theirs.  It's done so openly that many espionage agencies openly call themselves "agencies," though the spies themselves are called "consultants" or "contractors."

Some firms that hire them can plead ignorance - which is to say that they chose to ignore certain facts.   They needed some expertise for a short period of time, wanted to save on overhead, wanted to bring in skills without having to invest the time and money to develop their employees, or whatnot.  They failed to consider that they were bringing in workers who would learn a great deal about their organization, who would later go to work for a competitor, bringing with them all the knowledge they had gathered.

The irony of it is that they were aware at the moment they engaged the contractor that he had experience working for their competition, and they may have even been overtly interested in gaining access to the secrets he knew about the competition.  How could they have been so naive to think that, when the contractor was done with them, he would not take their secrets to his next contract?

There isn't much in the way of a legal defense: if a contractor steals data, that's likely something that can be prosecuted - but even then, prosecution punishes after the fact and prevents nothing, though it may arguably discourage others from doing the same in future.      But data is the least important thing that contractors make away with: the ideas, plans, best practices, and other "general" knowledge does not have protected status under the law (unless it has been patented), and there is no legal recourse with which to threaten prosecution to silence the spies.

That is to say that they can, and do, freely communicate your plans to competitors, which is valuable business intelligence in that it enables them to understand your strategy so they can outmaneuver you - either using your plan to get there first, or at least be hot on your heels - or even if they do not choose to imitate you, having the certainty of what you intend to do and the luxury of time to plan their defense.

"Don't hire contractors" is likely an effective solution to keep your strategy safe from the competition - but is also likely to be expensive or impractical.    The reasons companies give for hiring contractors are all valid ones: they may not need skills on a long-term basis, they may not have the ability to train and develop their own people, or they may need bodies faster than their HR department can obtain them (which is an entirely separate problem, but a reality with which most managers must cope).

"Disinform contractors" is another expensive and impractical solution, though I suspect that it is fairly common: a firm will engage multiple agencies, such that no single agency has access to the full picture, and given that four teams may be working on a different plan, a contractor has only a 1:4 chance of being able to tell the competitors what you actually plan and a 3:4 chance of telling them a plan that you have developed and considered, but ultimately decided not to pursue.  Even then, you're absorbing the R&D cost of a plan that might be viable.

"Hire contractors selectively" may be a better solution.   For supporting tasks that don't involve information pertinent to your competitive advantage (installing equipment, handling payroll accounting, and the like), the information to which they have access might help a competitor to make their own operations more efficient, but will not give them a peek at your battle plans.    But for other tasks (planning your marketing strategy, implementing an operational innovation related to your core product, etc.) contractors are given access to information that can be exploited to undermine or counteract your competitive advantage - and the companies that hire them afterward know this.

In any case, controlling contractors will not be a completely effective solution for employers who have a bigger leak - key employees who are poached by competitors bring with them the same knowledge.   In a former era when employers offered long-term employment, they could likely count on having loyal employees who would protect their secrets, but in the present day in which employees are treated as disposable assets (which is to say, they are treated like contractors), a firm can't expect much loyalty.   This, too, is a problem that should be rectified, but an entirely separate issue to managing the spies you invite into your headquarters office.

Wednesday, February 6, 2013

Building Organizational Culture

I read Rhoades and Stephenson's book Built on Values as food for thought on organizational culture.   Jordi Canal's book on respected companies was the best book on corporate ethics I've encountered, which correlated the ethics of a commercial organization to the benefit it provides to its consumers, but it left me wanting a practical approach to effecting a positive culture, and my hope was that Rhoades and Stephenson would address that deficiency.

My sense is that it was successful in doing so, though only to a certain degree.  The authors suggest, and rightly so, there is no single corporate culture that can be transplanted into all organizations, but each has idiosyncrasies that determine the values that define its culture - and so it follows that each organization, such as it is, also requires a highly idiosyncratic method of achieving cultural improvement.   But at the same time, there are sufficient commonalities to discuss the matter in general ways that may be applicable, by various means, to a broad range of organizations.

The fundamental axioms on which the book rests are (1) the notion of organizational behavior is an abstract assessment that is merely an amalgam of the behavior of the people it comprises; and (2) people inside of organizations, particularly companies, generally do what they are given incentive to do.

That is to say that the formal documents that are often used to gauge a company's culture - its mission statement, vision statement, statement of values, annual report, and the like - are all largely aspirational.  They depict the organization as it wishes to be, or as it wishes to be perceived regardless of how it actually intends to behave.  Said another way, they are in effect marketing fluff that may have no resemblance to reality.

It's suggested that a highly effective way to peel back the veneer and see what's really underneath is to look to annual performance reviews of employees.  Here you will find what people are being encouraged to do and rewarded for doing.  As such, a company whose mission proclaims that it puts people before profits is unmasked by performance criteria that are entirely focused on sales quotas and operational efficiency goals and make no mention of the values the company publicly espouses.

My sense is that merely inspecting those documents is a good start, but not sufficient evidence.  I've worked in places where values were included in performance reviews, often as the first section, and were skimmed over in favor of more granular criteria that had no relevance to values, and were considered to be of greater importance.   So the review criteria themselves may still be disingenuous and misleading.

To get to the heart of the matter would require closer inspection: compare the ratings on performance reviews to actual incentives and rewards - compensation, benefits, bonuses, promotions, and the like - not just on the systematic level, but on the individual level.    That is to say, correlate the degree to which employees receive such rewards to their ratings in their performance reviews.   If you find that employees who score highly on values-based metrics  receive less in the way of rewards than those who accomplish the financial and operational performance goals, you're dealing with a company whose ostensible culture is in contradiction to its actual behavior.   In smaller words, you are dealing with a firm that has no integrity and likely very poor ethics.

With that in mind, the remedy is fairly simple: develop performance reviews that provide incentives to uphold the stated values of the organization, and you will effect a positive change in the organizational culture.

Granted, the authors had far more to say on the topic that just that - there are also matters such as how to define values (which is foundational), how to communicate them (also important), how to hire and promote the right kind of people (which is a distraction as a good apple doesn't unspoil the barrel), and other related topics.   But I found the notion of performance incentive to be among the most novel and substantial elements of their argument.

Saturday, February 2, 2013

Motivation and Society

I've been meditating on the topic of psychological motivation that I mentioned in an earlier post ... which has taken me in a pessimistic direction, but one that seems to have some merit.

Form the previous post, the kind of product that serves a consumer's functional needs is often quite simpler and cheaper than the one he chooses to purchase: considering the need for warmth, clothing adequate to the task is quite cheap, but most consumers purchase far more expensive clothing - such that the proportion of the cost that represents a solution to functional needs is a small percentage in comparison to the proportion that represents psychological needs.

But what, then, is the basis of these "psychological" needs?   It's entirely hazy, and economists seem to shrug them off without much consideration and move along.

What has occurred to me is the psychological needs of which we speak are often social needs - particularly the need for esteem.  I do not discount that there are likely other psychological needs, but esteem seems to be the strongest in terms of consumer motivation.

Specifically, if it were not for the social context, a customer would likely choose the cheapest product that satisfies his functional needs.   This is admittedly pure theory, but it's borne out in considering that the mark-up on products that are conspicuously consumed is far greater than that on those that are anonymously consumed - which seems to support the assertion that people pay a much higher price for products that others will see them using.

The only reason I can conceive this to be so is because people value the impression they make upon others who observe them.  Given the example of clothing, consider the amount of money spent on the clothing that is worn in public, compared to the shabby but comfortable clothes in which people slouch about in their homes, out of public view.  This clearly derives from the need for esteem - the need to be equal to or better than others in a society.   That is, in a social setting, a consumer doesn't want to be seen consuming a brand that is merely sufficient to his needs, but one which is equal to or better than that which others use.

A brand that is equal to that used by others is leveraged when there is a desire to fit in, and a brand that is better than that used by others is leveraged for purposes of asserting superiority or dominance.   Perhaps this seems very childish, the kind of thing that is done among cliques in junior high school, but it is also pervasive in adult life.  Consider that the businessman wears a suit to fit in with other businessmen, to show he belongs, or he may wear a more expensive suit to suggest to others that he is better than them.

It also stands to mention that there are a variety of bases on which an individual may consider his possessions to be "equal to or better than" than of his peers in a society.  The most obvious differentiator is money: the products are better because they cost more.   But this is not the only differentiator, nor likely the most prevalent in present-day society, given the nature of the things people say about what they own.  In fact, it's considered déclassé to brag about the price of things - so people find other things to brag about.
  • Mine is better because of its capabilities and features.  Therefore I have more power than you.
  • Mine is better because it is more durable.  Therefore I have more foresight than you.
  • Mine is better because I got a better deal.  Therefore I am smarter than you.
  • Mine is better because it is more energy efficient and is made of recycled materials.  Therefore I am more socially responsible than you.
  • Mine is better because the company that makes it donates more money to charity.  Therefore I am more altruistic than you.
  • Mine is better because more people of a desirable group of people use it. Therefore I am more popular than you.

All of this one-upmanship and posing is highly distasteful - but I have the sense that it is not all that wrong.   Scan any site that has user reviews of products and services, and see why they are happy with the products they have purchased, and what you will find is shallow narcissism and posturing - what motivates people to say a product is good is the feeling they have about being better than others because they own it.

That takes rather a distasteful view of human motivation, and one of which we as a society should likely feel deeply ashamed.   But I don't think that it can be denied that the need to be better than others is likely a significant driving factor in consumer behavior.