Should Rainbarrel Revisit Its Approach to Performance Management?

Should Rainbarrel revisit its approach to Performance

Management?

If Rainbarrel were within a month of bankruptcy and in the hands of a turnaround manager, the kinds of changes Hiram has imposed wouldn’t be so unusual and might even be considered reasonable. But as far as I can tell, Rainbarrel just needs to tighten its belt in a period of cyclically soft sales and more aggressive competition. The case portrays Rainbarrel Products as a basically healthy and successful company.

But I’d bet that we as readers are seeing only half the trouble Hiram has caused. Given the pressure to ship faster, the warehouse is probably making more errors and thus adding to the number of returns and customer complaints.

Now that every department has cut its staff, the company is probably hiring more expensive temps, consultants, and outsourcing firms. And let’s not even speculate on what the impact of a “wall of shame” might be. That’s the kind of humiliating tactic that could turn a devoted employee into a saboteur.

These troubles should be enough to teach Rainbarrel the first rule of performance management:

You get what you pay for. If the warehouse workers are praised for putting a box over an imaginary line, they will put it there even if it’s not ready. If you pay the sales force only for sales dollars, you might end up with more sales, but at bad prices or with too many extra services promised. I remember a time at Arrow Electronics when we decided to pay out a part of the sales reps’ commissions at the time they took the customers’ orders. The result was that we got orders that never shipped—or that were shipped and later returned for full credit.

One veteran salesman explained it this way, and I’ve heard the phrase many times since: “Look, you make the rules, we’ll play the game.” Before top management starts introducing new rules, then, it had better have a good sense of the kinds of games these rules may promote. Hiram is blindsided by the discovery that his...