Mike, the regional director of a multinational insurance company, was presenting the new commission matrix to the region’s sales managers in Pécs. Around fifteen people were seated at tables arranged in a U-shape. In his five or six years with the company, Mike had climbed the management ranks remarkably quickly. He had an exceptional memory, a sharp analytical mind and a charismatic presence. He wore the label of ambitious careerist almost as a badge of honour. It would have been unfair to accuse him of false modesty.
He had come prepared, as always. He anticipated likely objections and usually had a convincing answer ready for each one. His reputation rested on consistently delivering the company’s ambitious targets.
Clara had returned to her professional alma mater, the company where she had started her career, after several years of experience in insurance. This time, she was joining as a team leader. She soon discovered that the company’s collection of surprises had acquired a few new additions in her absence.
As Mike worked his way through the new commission matrix, Clara tried to reconcile the proposed targets with the considerably changed market conditions. Most notably, a well-funded, fast-growing competitor had entered the market and was aggressively, and rather successfully, poaching even the seasoned old hands teetering on the edge of burnout. Not to mention the effects of inflation, which had grown to enormous proportions.
The performance requirements in the new commission matrix were hardly modest to begin with. Changing the required balance between life and non-life insurance sales would, in the best case, have sent only a few advisers heading for the door. And the number of advisers in each team, along with their results, played a crucial role in whether sales managers could meet their own recruitment and performance targets.
The new arrangement was obviously attractive from the company’s perspective. Clara found herself wondering whether Mike had A) simply had a bad dream the night before, B) taken the team leaders for complete idiots, or C) for once, been let down by his otherwise brilliant logic.
Still reeling from her astonishment and trying, with all the wild naivety of a newly appointed manager, to make sense of the situation, Clara accidentally dropped her pen. It struck the floor with a loud clatter in the stunned silence. As though the pen itself had asked to speak. Clara bent down to retrieve it. By the time she reappeared above the table, looking as though she had managed to put her thoughts back in order, Mike was already sweeping ahead with his presentation.
Joe, who had been with the company for twenty years, was absorbed in noisily leafing through his notes. Two other long-serving managers remained conspicuously motionless in their seats. Looking back, Clara thought everyone had simply been coping with the sudden shock in their own way.
What surprised her most was how natural this one-way communication seemed to everyone else. The figures affected every person in the room, yet nobody appeared to have a question. Clara had expected at least one of the old hands to ask the obvious:
Sorry, WHAT?!
What twenty years had taught Joe
After the meeting, over coffee in the city centre, Clara asked Joe how they were supposed to meet the new targets.
“You start working with your people. If it works, fine. If it doesn’t, and there’s a good chance it won’t, we’ll say it’s a general problem and that we tried.”
Joe had seen several regional directors come and go, each with their own plans, expectations and promises of performance. He also knew Mike well enough to understand how little point there would have been in challenging the commission matrix in that room. Mike would have dealt with each objection easily enough, and the targets would still have been waiting for them the following morning.
Joe preferred to put the new system to the test. He would take the targets back to his team and make a serious attempt to meet them. If several teams encountered similar difficulties, the matter would no longer be one manager’s opinion against the regional director’s. They would have the results.
Clara began to understand just how far apart managerial responsibility and the ability to influence a decision could be. She, too, was expected to deliver results under the new commission matrix, despite having had virtually no say in how its conditions were set.
For Joe, twenty years of experience had long since become routine.
When having an answer ready means the question never gets asked
Mike’s presentation ended without a substantial objection. Yet the people in the room knew the realities of insurance sales, the consequences of their competitor’s recruitment drive and how sensitive advisers could be to changes affecting their commissions.
Mike’s exceptional preparation had a less obvious consequence. A leader who arrives with an answer to every anticipated objection may eventually find that certain questions are no longer asked at all. Joe had remained silent because he saw a problem and, from experience, considered it more useful to attempt the targets first and return to the matter later with actual results.
The commission matrix could therefore be introduced without its underlying assumptions being seriously examined during the meeting. To the regional director, the silence might have looked like agreement. At least one experienced manager, however, was already preparing for the difficulties he expected to encounter.
In my book, The Lies That Hold the System Together, I describe a similar organisational condition as false stability. A meeting ends without visible disagreement, a decision appears to have been accepted, and work continues. Meanwhile, those responsible for implementation may have serious reservations, which they attempt to manage within their own areas of responsibility.
The consequences may become particularly important during subsequent performance reviews. If teams fail to meet their targets, management may legitimately examine sales activity, motivation or the quality of execution. But what happens to the original concern that the commission matrix imposed unrealistic expectations under the prevailing market conditions?
The meaning of such an objection can easily change as it travels upwards. What began, before implementation, as a business concern about the design of the scheme may later appear in management reports as poor performance or insufficient sales activity. The original problem has not necessarily been resolved. It has simply acquired a different explanation.
Joe intended to rely on the actual results of several teams to establish whether the difficulties were widespread. His approach was reasonable, but it came at a price: reservations about the commission matrix could only return to the decision-makers after the system had been introduced. By then, the discussion would be about how the system was performing, rather than whether its original design was sound.
Notes
This article is based on a meeting in the insurance industry and a conversation that followed it. The dialogue has been reconstructed from memory rather than reproduced as a verbatim transcript.
The organisational mechanisms illustrated by this case are explored in greater detail in my book, The Lies That Hold the System Together.