“So, you’re the culprit,” I repeated. “What specifically did you do that was so counterproductive?”
“I remember, it wasn’t anything extreme. We have different sales channels and different product lines, with outside sales, inside sales, internet sales. I began to hand out bonuses for each department with the highest gross margin, another for the highest revenue in the quarter.
“It’s funny, now that I think about it, when I handed out those bonuses, the room was quiet. There was no jubilation or high-fives, just a nod and a polite thank you.”
“Tell me about the down-side?” I asked.
“I found out later,” Reggie explained, “that each department gamed the gross margins. They would pump up the pricing in the last week of the quarter and then rebate it back to the customer in the next quarter. In the end, we still got our standard margin, but each department manipulated the bonus system. And all the progress we made on cross-selling was lost.
“And it’s not so much that they had to pay the piper in the next quarter, but look at all the wasted energy, counterproductive to what we stand for. And the last thing on our mind was doing a good job for the customer.”