The Squawk Box effect on CEO pay

From the Wall Street Journal:

How big is the CNBC effect? “CEOs who appear in CNBC interviews will earn $210,239 more” on average in the following year, the professors say, compared with similar CEOs who didn’t go on.

CEOs of small companies see a bigger bump. The effect for CEOs in the smallest firms was $130,925 greater than for CEOs in the largest companies, even though big business CEOs usually get paid more.

Cable TV is better than print. A CEO who got more print coverage than average in a year got a tiny boost in pay the next year.

Wells Fargo meets the Wehrmacht: employee rewards and risky behavior

Employee of the Month. Sounds like a great idea. For the price of a cheap plaque and a good parking spot, bosses can motivate employees to deliver superior service. So the thinking goes.

Academics call it “status competition.” And sometimes it backfires.

Wells Fargo has been accused of opening millions of fake bank accounts. Employee compensation was tied to opening new accounts and workers could lose their jobs if they didn’t meet targets. They also had status competitions.

According to the Miami Herald, the east coast region for Wells Fargo was run by Laura Schulte for about five years. Staff recall her sales promotion called “Schulte’s All Stars.” A 2010 copy of the all star list obtained by Bloomberg ranked managers by a mix of metrics, all gauging volume in different ways. Some workers were on track to be in the “Schulte Hall of Fame.” Sure, targets were hit, but laws likely were broken.

What this have to do with the Wehrmacht?

Research published by the National Bureau of Economic Research highlights the tradeoff between the benefits of higher performance against the costs of risky behavior using an … um … “interesting” data set.

In World War II, the German air force had a version of employee of the month. It was a daily bulletin called the Wehrmachtsbericht, produced by the propaganda department and broadcast daily over the state controlled media.

Being mentioned by name in the bulletin was one of the highest forms of recognition used by the German armed forces. Only 1,200 of the 18 million men in the armed forces were mentioned by name in the bulletin.

German pilots would get mentioned for an extraordinary number of air victories. Here’s Hans-Joachim Marseille’s mention in the bulletin on June 18, 1942 (his second mention):

First Lieutenant Marseille shot down ten enemy planes in a 24 hour period in North Africa, raising his total score of aerial victories to 101.

The bulletin served two purposes. The first, as propaganda to raise morale among the German people. The second, was to inspire German soldiers to achieve top performance.

But did it work?

The researchers divided pilots into two groups: top-ranked pilots and everyone else. Top ranked pilots were in the top 20 percent of victories (number of enemy planes shot down). Everyone else was in the other 80 percent.

A statistical analysis of pilots victories found that performance overall improved in the periods after a pilot gets a mention in the bulletin. The highest ranked pilots saw a 20 percent increase in their scores while the lower ranked pilots saw a modest increase.

What’s the cost?

It’s safe to say that dogfights are a dangerous undertaking. To shoot down an enemy plane, the pilot has to put himself in harm’s way. A pilot seeking to increase his score is increasing the chances that he’s going to get shot down himself.

Top-ranked pilots saw no significant change in their “exit rate.” The other 80 percent of pilots saw their exit rate increase by 20 percent—and, in some cases, more than double.

Overall, the gain in “victories” from mentioning pilots in the bulletin was outweighed by the loss in pilots from taking additional risks.

There’s a management lesson: Incentives can spur superior service, but can also encourage risky action. Think through the implications of your incentives.

DASM at CenturyLink: Door-to-door sales in a digital era, then things really go downhill

As a consultant, I’m a collector of DASM moments. Today’s DASM moment is brought to you by CenturyLink.

For those of us who work at home, one of the single biggest annoyances is the unannounced drop-in visitor. And the biggest of the biggest annoyances is the drop-in visitor trying to sell something. And the worst of these might be “Mitch” from the hated-telephone-monopolist-turned-broadband-provider now known as CenturyLink.

But first some background …

A year or so ago, as noted elsewhere on Econ Minute, Google Fiber made some noise about coming to our city.

That caused the cable company, Comcast/Xfinity/Whatever, to boost broadband speeds while simultaneously engaging in customer service tactics that only angered current and former customers.

Not to be outdone, CenturyLink boosted its broadband speeds and sent an army of door-to-door salespeople, like “Mitch,” to get people to sign-up for CenturyLink’s service.

One afternoon, Mitch shows up at my door to pitch CenturyLink’s latest offering. I told him I was busy and to just leave the literature.

Nope. Mitch wouldn’t just leave the literature.

He kept talking and talking and talking.

And talking and talking.

I finally asked how much it would cost to match the same package I’ve got now.

Mitch spouted off a number that sounded pretty close to what I pay now, so I told Mitch to wait outside while I got my current bill.

Five minutes later, I come back and Mitch is sitting in my kitchen with his sign-up sheet filled out.

WTF? Who invited you inside my kitchen, Mitch?

Mitch talked fast … Real fast … He was drawing pictures of fiber loops showing how my neighbors are killing by broadband, the that would never happen with CenturyLink.

“Cheaper … better … how many boxes do you need?”

At the same time, my wife is Googling around and sending me text after text saying, that Mitch is full of … well, let’s just say he was talking real fast.

As I questioned him about pricing, he pulled out this fancy multicolored sheet with options and dollar amounts.

I went to take a picture of his sheet so we could work from the same page. So I can say, “Yeah, I want Disney, but not ESPN, what’s that price?” (Plus, he’s sitting in my kitchen.)

That’s when Mitch changed.

His hand shot across the super secret magical price sheet and said, “I can’t let you take a picture of that.”

[Well excuse me …]

That’s when I said, “Then I think we’re done and you need to leave.”

And he did. Just like that.

Thirty minutes of speed talking, fiber loop pictures, packages and pricing, pricing and packages, and *POOF* Mitch was gone as soon as his secret pricing sheet was seen.

I would love to see what was on that magic pricing sheet. Instead, all I have is a picture of Mitch’s forearm. A hairy forearm.

And that hairy forearm is my memento of DASM at CenturyLink: They’d rather lose a sale than provide a customer with transparent pricing information.