This week’s theme for the Startup chronicles, aka “Why some Nigerian businesses fail,” is consumer biases. We hope that you are both entertained and educated by this story.
A startup recruited two divisional heads (DHs) to run its business units. Both had relevant industry experience.
One business unit targeted premium consumers while the other targeted low-income consumers. The premium brand DH was personable and could connect with any customer. Although he was born and lived his early life abroad, he was willing to get his hands dirty. The low-end brand DH was born in Nigeria but went abroad for his first degree and master’s before returning to work in Nigeria. He loved publicity.
The business strategy was simple; penetrate the market with the low-end product while building its premium base over time, as it would be more difficult to get its competitor’s premium customers to switch. However, the premium product would drive its profitability in the long run.
But there was one problem.
The low-end brand DH wanted to oversee the premium business unit. He went to industry conferences and paraded himself as the DH of the premium brand. He granted interviews and appeared in the media frequently while his product suffered. The Chief Operating Officer (COO) became concerned and cautioned him, but he did not change.
After one year, HR suggested that the roles be switched. They made him DH for the premium brand and moved the other DH to head the low-end business unit. Within six months, sales of the low-end brand picked up while sales of the premium brand stagnated.
At the next performance review session the DH for the premium brand was asked why sales had stopped growing. He said that the low-end brand had cannibalised his brand. The business gave him till the end of the next quarter to turn things around, but the numbers did not improve.
The COO recommended his termination and suggested that the other DH oversee both brands since he had shown that he could sell both. The Founder/ CEO agreed it was a brilliant idea to let the other DH oversee both products. However, he said the DH recommended for termination had boosted the
employer brand with all the publicity he generated. Rather than let him go, he created a new position in the executive office and approved the purchase of a new car “befitting of his new status.”
Then the other DH demanded a salary increase but the CEO said he would get a 5% COLA (cost of living adjustment) in the new financial year. The DH asked for a further increment arguing that all staff would get COLA so it couldn’t be considered a salary increase based on his additional workload. The CEO refused, so he resigned without notice.
𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲
While publicity can be beneficial, it should not be at the expense of your sales. Reward those who can do the job. Never assume that people will be there to grow your business without the right recognition and compensation.
Originally posted on LinkedIn
