A recent article in the New York Times has some food for thought for wise negotiators. The authors pose this question – How do you motivate people to do the right thing when the ‘market’ doesn’t work?
Their context is the chronic shortage of water in California. This has now become so bad that new mandatory water-reduction regulations came into effect on April 1st. Most of these appear to concern communal water usage such as sprinklers on golf courses and cemeteries, and the replacement of community lawns with grasses which are more resistant to drought conditions. Private citizens are encouraged to improve water retention methods through a rebate scheme on new garden watering equipment, and new homes are subject to stricter regulations.
However the plan also encourages private homeowners to play their part and voluntarily water their gardens less often. This part is failing; typical Californian home owners are not motivated to do this. The classic way to encourage them would be to increase the price of water and make it financially attractive to obey the request, but the gardening fraternity in the Sunshine State are stubbornly proud of their lawns, and the few extra dollars each month just doesn’t motivate them to be more careful with water usage.
One innovative idea which is being considered to remedy this problem is very cheap, but very appealing – a lawn sign distributed free which says ‘My lawn is yellow because I took a pledge to help California’. Of course, home owners could only display it if their lawns really were yellow!
When I read this I was struck by the similarity to an incident affecting Thomas Cook, the well known travel agency. Nine years ago two children tragically died from carbon monoxide poisoning whilst on a Thomas Cook holiday in Corfu. The independently owned hotel was held to be responsible in a trial in Corfu in 2010, and subsequently damages were paid to the family (about £700,000) for the loss of the children and to Thomas Cook (about £3,500,000) for their loss of profits, and costs. However, at the inquest of the two children held over the past few weeks in the UK the jury found Thomas Cook had breached their duty of care by relying on safety assurances given by hotel management at the time rather than checking the (decrepit and dangerous) water heating facilities for themselves.
The pay-outs 5 years ago were not a secret, and if it had any social conscience Thomas Cook would have recognized the injustice in the amounts and further compensated the parents from the payment they received. But it didn’t, and there were no market forces which could make them.
That is, until people power came into play. As a result of the appalling publicity and a resulting slump in their share price Thomas Cook were shamed into making a late and halfhearted apology to the parents and a charitable donation of £1.5 million to UNICEF.
In both cases the motive factor is the basic human instinct to ‘look good’ in the eyes of our neighbors and peers. This may be for reasons of vanity, feelings of self-worth, or commercial necessity, but it does seem to work.
And the lesson for negotiators? If you have a customer who regularly fails to pay invoices on time, notwithstanding late payment interest built into your contracts, or a supplier who regularly fails to honor delivery promises, notwithstanding that this could be an expensive breach of contract, think outside the box. If the money cost doesn’t change their behavior, can you activate their need to ‘look good’ to stop their bad behavior?