Re: Incentives LO1412

Tom Burke (
Sun, 28 May 95 23:24 PDT

Replying to LO1403 --

Reply to Michael McMaster:

Mike raises interesting issues regarding competition and cooperation. I
think it is important to consider the context that this competition is
raised. We are in competition for our employees, and they for their
employment. This might be considered the rule of survival of the fitest.
I do not question the issues of cooperation, but again, only to the extent
it allows me to compete. In the larger since, my biz is a part of an
industry which is under attack - insurance. Michael Porter writes of the
structures by which industries deliver their products. In this industry,
the vendors (insurance companies), deliver their product via retailers
(agencies). No one vendor or retailer dominates. This industry is so
highly competitive they can't cooperate within their own companies. The
employees of major insurance companies are in a state of instablility.
Witness the merger of CNA and Continental. Hundreds, if not thousands of
employees are going to lose their jobs. They are not necessarily going to
be in a position to consider the issues of how, in the greater good, their
job should be lost. Alot of posturing is going on. They are going to
cooperate only so long as it helps them keep their jobs.

At the agency level, the vendors are in a dominate position. Agencies
will cooperate on certain levels but they are in high competition for the
clients' biz. Cooperation may be a fine thing but it is not going to get
in the way of getting the biz from the other guy. Employees work in an
environment where we must compete. We can discuss the niceties of
cooperation but the individual biz survives only to the extent it can add
value in a better way that the competition. If it can not add value
better than the other guy, the other guy gets the biz, my biz loses
revenues and we lay off staff.

Here's the rub, we live in an environment which demands of my biz that we
add value better or die. Some companies have lured employees into
thinking their job was secure, the company has taken the fear out, as Dr.
Deming advised. However, taking the fear out of employees with regard to
the environment in which we operate is a falacy. It is like teaching safe
sex to our teenagers by telling them if they wear condoms they have no
worries. It's a false and irresponsible approach.

I don't think the model of animal predators is necessarily illuminative of
our economic environment. Predatory pricing is destructive of the
industry, yet it occurs. In this environment, I still must find a way.
Competition in the economic since is an important ingrediant, providing it
does not turn to predatory destructiveness. Even when it does, I better
be able to endure or die.

In this environment, I need to encourage my employees, not hide from them
the truth and reality of their environment. I can philosophize about the
evils of competition as I lay off my stunned employees. Another way, is
to encourage them, put into place the structures which help the firm
compete so that we maintain our position or advance on my competitors. To
encourage them, I want also to provide the leadership which helps point
them in the right way. If we put together the right structure, it keeps
them tuned to the environment. One of those structures is to make their
pay a means to keep them tuned. It's the difference between the interest
the chicken and the pig have in breakfast, they both are have an interest
in breakfast. Only the pig is personally involved, therefore, the pig has
a higher since of the meaning of breakfast. I submit, keeping the staff
tuned into their environment is fair as well as motivational. If they
have the opportunity to reap the rewards of their efforts, it is likely
they will be more personally involved in the environment. Frankly, if
they seek a safe harbor where they are just taken care of by some parent,
it is not the mindset that will work in my biz.

Keeping everyone in the organization a server of some client, where
everyone has the abilty to reject or accept the clients' biz, by paying
the server based on their abilities to add value, puts everyone into the
environment. We won't have to deal with employee evaluations because their
clients will do that for us, the data of their own harvest will tell us.
Watching the business results, using only the data instead of opinions,
and tying all of it into the reward system - you get paid for what you do,
seems fair. If we lose biz and have to lay off staff, it won't come as a
surprise. Rather, the employees will already have their thinking working.

Tom Burke 
Ramona, California