Tuesday, August 17, 2010

Training People to be Disloyal

Loved the segment below from Seth Godin. His example is about publishing houses training authors and book agents to be disloyal. However, I've seen this far more often in the job market recently. Many of my friends are getting really good offers when they start looking around for a new job. When they let their employer know that they are leaving, they almost always get a huge counter offer. I keep hearing numbers that are 30% - 50% above their current pay and it drives me crazy. Why haven't these companies been paying the employees what they were worth the whole time? Sure, it's great to have people on the P&L at a below market rate, but even in bad markets, great talent has tremendous value. These employers are training my friends to be disloyal, and it's working...

"The way you price expensive transactions is going to train your partners and customers in how to behave.

When selling a book to a major publisher, it’s common for the publisher to offer an advance against royalties. In fact, the advance is the most significant tool that publishers use to get a coveted author to pick one house over another--royalties and most everything else are fixed.

It turns out that if an agent offers a hot book to multiple publishers at the same time, the advance offered goes up, often dramatically. Obviously, the publisher was capable of offering the higher advance without the auction, but it was the risk of losing the book that got them to pony up more money.

This trains agents and authors to be disloyal, to shop around and to create an artificial game to raise the price."