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Follow Up: More On Ridiculous Incentive Awards…

August 11th, 2009 · 7 Comments
Follow Ups · Incentives · Just For Fun

I don’t think I will ever understand how Jarret’s brain works- I swear he’s got this internal indexing system that allows him to precisely catalog everything he reads (which is a lot) and generate appropriate reponses and articles on the spot. (I am hoping that this will come in handy for literature reviews at some point. Jarret, consider yourself warned.) For example, following are the links I got after the most recent “Dilbert On Incentives” post. I love that the stories, in addition to being absurd, pretty accurately characterize the current state of the economy.

The first article that was sent my way is a New Yorker piece from November 2008 that talks about how high end promotional and deal gift companies are suffering due to the recession. In other words, some organization called Icon Recognition is sad that it can’t get companies to pay $300 each for lucite blocks with dinosaur heads inside. (I kid you not. That is an actual example in the article.) Some other items mentioned in the piece:
— a faux emerald-and-ruby crown to celebrate a deal for Merrill Lynch
— a gold-plated replica of the Mandalay Bay Hotel commissioned by Merrill Lynch (I am noting a bit of a disturbing pattern here)
— a Lucite banana split commemorating Sun Capital Partners’ acquisition of Friendly’s
— a little (functional) banjo commemorating a deal that Merrill did for G.E. called Project Bluegrass (I was right about the disturbing pattern*)
— a miniature statue of the god Apollo commissioned to celebrate a private-equity deal for Apollo Capital (Apollo was bare-chested, and his foot was planted on the torso of a writhing grizzly bear, which he seemed about to shoot in the face with a tiny bow and arrow. Obviously.)

This all reminds me of an economic paper by Joel Waldfogel entitled “The Deadweight Loss of Christmas.” The general idea is that gift-giving is often inefficient because the gift receiver doesn’t always value the gift as much as it cost to buy it. I don’t know about you, but I doubt I would ever shell out $300 of my own cash to get a dinosaur head trapped in translucent plastic. Well, maybe if it was a real dinosaur head. And if it was in Jell-O instead of lucite. (Interestingly, the article does briefly mention an example of Goldman requiring employees to pay for their own deal toys. I wonder how many actually did that.)

While we’re on the whole “paying for your own sh…er, stuff” subject, let me introduce you to the second article. This one was from Sunday’s NYT, and it, well…just read the important part for yourself:

“When Ian Schafer, the chief executive of the digital ad agency Deep Focus, won 10 Communicator Awards for the agency’s work on Web sites, including one for HBO’s “Flight of the Conchords,” he was delighted.

He was less thrilled when he received a note from the awards: If he wanted the actual trophies, he would have to spend $1,590.”

Yeahhhhh…for the record, I made good use of the “Contact Us” feature on the Dilbert web site- apparently there is a section for submitting strip ideas. This one’s just too good to go to waste.

* My favorite part of the article is the quote “Icon Recognition is already coming up with a pitch to commemorate Bank of America’s acquisition of Merrill.” I have a very good friend who is working on the BoA/Merrill transition…and given that the job makes him feel a little dead inside, I have to reason that a deal gift referred to as a “tombstone” is particularly appropos. I think he is still waiting for his to arrive.

Tags: Follow Ups · Incentives · Just For Fun

7 responses so far ↓

  • 1 Larry // Aug 11, 2009 at 10:33 am

    Interesting article. I agree I think gifts are basically irrational… Don’t get me wrong I give them but not because they are efficient economic transactions. I think companies should limit “gifts” to $20 unless the item has significant real world use like cash, a paid vacation or a gift card then give as much as you want…. not that we should regulate just that’s what I would want as a rule with any company I work for.
    I am sad for the poor child in India or China or where ever that sticks plastic dino skulls in hot resin though… That was probably a sweet gig for a kid as far as sweat shop labor goes and now there’re unemployed 🙁

  • 2 econgirl // Aug 11, 2009 at 11:04 pm

    Oh wow, more examples of insane deal toys, this time from Lehman:

    “There’s a miniature roll of aluminum foil suspended in Lucite, marking a sale last year by Alcoa. A tiny pipeline immortalizes a Sunoco-related deal. Gripping a replica of a Lawry’s seasoned-salt jar — a token reminder of the spice company’s August sale from Unilever to McCormick & Co.”

    The article even goes on to explain that the absurdity of the items is on purpose – “Then [lucite] became wildly popular among deal makers looking to track their success and reward clients without violating rules limiting gifts to executives of public companies and banks.

    “There is no resale value,” Mr. McDonald says. “If I gave you this Wachovia deal toy for Christmas, you’d look at me like I was insane.””

    Oh. So the gifts are inefficient on purpose. Nice. *sarcasm* (Hat tip to @nickducoff over at Twitter)

  • 3 Tony // Aug 12, 2009 at 1:15 am

    I won’t argue with the fact that those executive gifts seem wasteful, but I don’t buy the “Christmas is inefficient” story — at least for the stated reasons.

    That’s because the material value of the gift is inextricably linked to the gift giving experience. In the Christmas gift exchange, I get utility out of giving the gifts as well as receiving.

    Actually, my favorite part of Christmas is the anticipation of how my friends and family will react to my gifts.

    Because there’s value in the exchange, we cannot conclude that Christmas gift-giving is inefficient — even if everyone values what they receive (in material terms) at less than the purchase price. Doing so neglects the joy of giving.

    Somehow, every member of my family is grateful for Christmas’ socially-forced giving experience. I think it’s because we’re all better off for it.

  • 4 econgirl // Aug 12, 2009 at 3:25 pm

    In his paper, Joel addresses the point that you are making. He acknowledges that there is utility associated with giving and receiving gifts, but then points out that that utility *should* be there regardless of what gift is given. (Of course there are exceptions for gag gifts and the like, but who would give gag gifts as xmas presents?) Therefore, there is still inefficiency in giving a poorly-matched gift as opposed to a well-matched one. If you assume that the giving and receiving utility is sitll there if cash is exchanged (an assumption which on some level I do find questionable), then cash is still clearly better.

    I think I should have realized that economics was my calling when I started taking my mom to the mall the day after xmas to exchange the gifts that she got me for stuff that I actually wanted. 🙂 (To her credit, she did manage to wrangle up a Wii Fit for me last year, which was greatly appreciated.)

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