Agency Referral Misalignment

Andrew shares a story about how incentives affect behavior in his agency business.

"We own a bunch of different agencies, and logically when you own all these agencies, you'd think the big agency should refer their smaller leads to the smaller agency. We introduced everyone, didn't force them, but figured they would get it since they're part of the family.

I did a call with one of the smaller agency guys and he said 'Man, I'm not getting any leads.' I realized that for these guys, there's no reason to do it. They might get a little referral fee, but it won't make a difference to their bonus. On the downside, if they refer the work, they could lose someone who might come back to them for future work, or if it goes badly, that person might email them saying 'I can't believe you referred me to this agency, they sucked.'

I realized time and time again, people will not do what they're not incentivized to do."