So tell me what you want …

There’s a well-trodden phrase that basically goes: “Don’t tell me your values. Show me your budget, and I’ll tell you your values.” Different twists on that are: “You get what you incent” or “You get what you measure.” Mission statements and platitudes are as cheap as the paper they are printed on, but money and time and what a company (or person) does with them are revealing.

Companies often use their budgets to improve things for shareholders, members, customers, the community and/or employees. Investments and incentives can help bring better outcomes. But such efforts can have unintended consequences.

A few years ago, Wells Fargo faced massive controversy (and an eventual $3 billion Department of Justice fine) because it set lofty goals and incentive programs to encourage employees to get customers to open additional accounts or products. Thousands of employees eventually found it easier to simply open millions of accounts without involving any customers.

Wells Fargo found itself caught in unintended consequences again when it fired employees for using mouse jigglers. (Go ahead. Google them.) The bank, and thousands of other companies, had put in place employee-monitoring systems, and a cottage industry sprung up to deliver all the “activity” required.

This yields a key question to ask when setting up a compensation structure or performance management plan. Does your plan, payment schedule, incentive structure or key performance indicators measure and reward activity or outcomes? Are you paying for inputs (time, mouse clicks, screws driven) or are you paying for what is produced: the outputs?

Paying by the square is common in our industry. Some contractors find they get more squares completed more quickly when squares installed is the payment structure rather than hourly pay. They figure: “I pay for output and get more output.”

But that method doesn’t account for output quality. A faster, possibly cold, weld gets a job done more quickly. An improper fastening pattern may save costs in terms of screws and time. A little less adhesive saves time and money.

But only in the short term.

That’s often how many decisions are made—in the moment with a short-term lens. So the temptation to cheat or cut a corner is real and prevalent. And anyone reading this magazine knows this, has seen it firsthand and has quality control measures in place to protect against it, I hope. Regardless, it is important to remain vigilant and cognizant of unintended consequences of your operational or financial policies and the gradual cultural shifts they can bring.

This brings up another key question: Are you sacrificing long-term success for a short-term boost in profit, productivity, etc.?

I recently read a fascinating article about Boeing. The author explained how Boeing went from “If it ain’t Boeing, I ain’t going” to the depths of two planes crashing and a door blowing out. The debacles were decades in the making and incredibly gradual. The throughline of the Boeing narrative, though, was the systematic focus on profits versus quality. Two decades of relatively small decisions that routinely chose profits over quality ultimately resulted in the loss of both.

It’s impossible to monitor the lowest common denominator 100% of the time for 100% of employees. Only building a culture of quality with an ecosystem of high standards can guard against that erosion.

I recently visited Baker Roofing, Raleigh, N.C., and found its company statement eloquently sums up what is needed for success in this industry (or in life for that matter):

“We shall do good work
At a profit if we can
At a loss if we must
But always good work”

Another key question to ask: Are your expectations or demands reasonable?

Negative outcomes also can come about from unrealistic expectations from management. Employees often will do what they need to do to keep a job, get the raise or earn the bonus even if it’s wrong. Part of the reason Wells Fargo was fined $3 billion is because it was “pressuring employees to meet unrealistic sales goals” per DOJ. This systemic, organizational element of bad outcomes is one that shouldn’t be overlooked.

“What businesses may not realize is that misconduct often results from managers who set unrealistic expectations, leading decent people to take unethical shortcuts,” writes Lynne Pain in the Research Handbook on Organizational Integrity.

She continues: “Corporate malfeasance cannot be written off to rogue actors or bad people. It is an organizational phenomenon whose roots lie in the decisions that managers make in the ordinary course of managing. How managers make decisions and what they decide—what opportunities to pursue, what goals to set, how to measure performance, how to pay people, how much to invest in risk management, technology, training and so on have a profound influence on how individuals do their jobs and whether the company as a whole acts responsibly.”

Your team can tell where your values lie whether from incentives focused on the wrong thing or outcomes that are sacrificed in the name of short-term gains. The team will notice and respond accordingly. And those outcomes can affect your company forever.

As Warren Buffet said: “It takes 20 years to build a reputation and only five minutes to ruin it.”

MCKAY DANIELS is NRCA’s CEO.
mdaniels@nrca.net