Beyond Stupid

Sometimes I get wind of a story that goes so far beyond our usual chronicles of stupid business decisions that I can’t even come up with a bad metaphor to explain just how stupid it is. Unfortunately, sometimes I get stories that are even worse than that. This one came up over the weekend, and while I won’t name any names in order to protect the innocent and avoid being sued by the guilty, I wanted to share it with my readers (assuming I have readers) as an example of something that starts out dumb, gets stupider, and then plummets to a level of stupidity that I have rarely encountered even in seven years of management consulting and six of graduate studies. But the really scary part is that there are probably people working for your company right this minute who will fail to understand why these events are a problem…

The story goes that an acquaintance of mine is working for an insurance company and has become one of their top sellers – her last quarter went over a million dollars in sales. Because she had topped out the company’s incentive program, she was in line for a bonus of $50,000 for the year. Someone at the company decided that $50,000 is a lot of money, and since they already had the million dollars worth of policies, they could dispense without the person who sold them, so they laid off our heroine just short of the deadline for paying her bonus. Someone associated with the company was heard to remark that for $50,000 they could hire two new people, although we should probably not assume that was the reasoning behind their decision; it doesn’t appear to be that well reasoned…

Now, just on the surface of this story we can already see that the people making this decision are idiots. Two new people will not be as productive as one of your best people, especially in a case where experience, personality, and selling skill are required. This is a short-sighted decision which may save the company money this quarter, or even this year, but will cost it far more once the current fiscal year is over. But that’s only the beginning…

On a second level, this decision will almost certainly cost the company any additional business from those clients who purchased products from our heroine. Insurance is a relationship-based business, and people tend to become very loyal to their agents, not to the companies they represent. When the clients who made up that million dollars in sales find out that their agent has been let go they are highly likely to follow her to wherever she ends up – and take their business with them. Moreover, they’re likely to tell their friends and family about this incident, and get as many people to come with them as possible. But that’s still not the worst of it…

Consider what this idiocy does to the company’s incentive program as a whole. They’ve just demonstrated to all of their remaining personnel that not only will they attempt to screw anyone they can out of his or her incentive money, but also there is a non-zero chance that if you perform exceptionally well for the company you will simply be fired for your trouble. It seems unlikely that any of their people will ever risk reaching that last level of incentives, which means that anyone who gets close will probably just slack off for the rest of that quarter (or year). In other words, they haven’t just lost their best seller; they’ve also destroyed any other personnel who had the potential to perform at her level…

Of course, none of that even considers all of the other personnel who will see this as writing on the wall and jump ship to the competition, taking their own client lists with them. So I suppose we can add a fourth level of stupid to this pile. I’d call it a cautionary tale, except I really doubt that any of my readers (assuming I have readers) are silly enough to try something like this. A much better question is whether anyone to whom you report is likely to try something like this. If so, you might want to consider getting your resume updated…