Behavior modification

Mortgage Banking, March, 2003 by Andrew Hubbard

IMAGINE AN OLD, COLD, DILAPIDATED FARM-house in rural Maine some decades ago. That would be my childhood home.

Now imagine my cat, wandering the house at night, looking for entertainment. One night he reached up onto the windowsill beside my father's bed, and knocked his wristwatch onto the floor to enjoy the crunchy sound it made against the linoleum. Enraged, my father leaped out of bed and heaved the cat out of the house.

A few nights later the cat, wanting to go out in the wee hours, again cuffed my father's watch onto the floor. Again, he enjoyed an exhilarating ride through the night air on his way to achieving his objective of a nighttime ramble outdoors.

My father, worried about his watch, began placing it on his dresser at night, and put an old, broken, one-dollar watch on the windowsill for the cat to maul.

From then on for the rest of his life, whenever my cat wanted to go out during the night, he would knock the watch onto the floor and receive executive transport to the great outdoors.

Who trained whom?

The answer is obvious and the example is trivial, but the precept is not. Let's move this case study into the business world.

For the first half of my career, I worked for a major car rental company. We routinely trained our 5,000 rental sales agents to sell an add-on that was extremely profitable to the company.

When the rental sales agents left training, they knew how to sell the add-on effectively. But during their first day on the job, they learned that selling it was unpleasant (since it increased the time of each rental transaction and frequently resulted in rude rejection) and pointless (since they were paid the same wage whether they sold it or not).

Acceptance rates for the add-on ran at about 20 percent.

The executive bean-counters looked at the numbers, scratched their heads and said, "Maybe we should incent them to sell it."

They did so, and sales doubled to about 40 percent. Profit zoomed. After a few months, the executives said, "OK- now that they're trained to sell it, we can stop the incentive."

The executives failed to understand the difference between training (which gives somebody a job skill) and motivation (which gives somebody a reason to do something).

The executives stopped the incentive, and sales fell rapidly to about 20 percent. They were appalled. But it was worse than that. Their profit predictions (and, by inference, their bonuses) were based on a sales rate of 40 percent.

The executives chugged their Maalox[R] and said, "Maybe we should reinstate the incentive."

Who was managing whom?

The point, pretty obvious by now, is that if management wants a particular behavior (like taking complete applications), then there must be four interlocking components to support the behavior:

* Training, so that people can do what is required of them.

* Management, so that somebody makes 'em do it.

* Systems, so there is a tool to do it with.

* Compensation structure, so there is an incentive to do it right and a disincentive for doing it wrong.

Andrew Hubbard is national training director for Irwin Mortgage Corporation in Indianapolis. He can be reached at andrew.hubbard@irwinmortgage.com.