Conspiracy of Fools, a glimpse into the performance marketing space

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ppc_small.jpgDM CONFIDENTIAL — A friend of ours, Joe Deal, founder of Best Nursing Degree and adrenaline junkie with almost 400 sky dives to his name, gave us a book to read not long ago.

Its Harry Potter length with non-Harry Potter sized font meant we weren’t exactly rushing to read this true-story tome. Yet, once we finally got over our hesitation, i.e. ran out of our mystery-fiction thrillers, Conspiracy of Fools has proven one of the most insightful books imaginable, and in many ways downright scarier than any mystery thriller we’ve read. For those who haven’t heard of a 700-plus page story from the award winning New York Times author Kurt Eichenwald, Conspiracy of Fools meticulously chronicles the rise and spectacular fall of Enron – a fall that not only saw the collapse of the once-Fortune 50 company with more than 22,000 employees but also the fall of the storied accounting firm Arthur Andersen.

The once high-flying energy company reached well beyond its Houston headquarters and into Washington with the “Enron scandal” being one of the driving factors behind the sweeping Sarbanes-Oxley Act of 2002. It’s not every company whose leading financial officer manages to siphon off roughly $55 million while simultaneously crafting deals which would lead to the bankruptcy of said company. It might be simply a scandal were they a private company, but this was a public company that lost employees and shareholders billions of dollars.

While we recommend any read the book, this is the performance marketing community we’re talking about, the same one who tells us our articles are generally too long. Jokes of length of the book aside, the foibles of a public energy company’s issues might not seem germane to our much more nimble, much less public segment of the online advertising industry, but as it turns out the same issues which plague us are the same that brought down the Enron house of cards. In one sentence, the story of Enron is about controls (or lack thereof) and conflicts of interest. The issues below are the issues that any company must solve and hopefully avoid to have long-term success.

– Company vs. self – We once joked that the arbitragers motto is “Ask not what you can do for the user, but what they can do for you.” It’s not that much of a stretch, and for better or worse we can rationalize why they often take the approach they do. As an arbitrager, you can almost get away with that attitude because your dollars are on the line. It doesn’t mean free reign to deceive and act illegally, but you are your main constituent. Employees don’t deserve that luxury. The company is to whom you are beholden and for whom your actions should benefit, both good actions and avoiding bad. For a variety of reasons in our modern era, employee trust outside all but a handful of companies is low. If that’s how you feel, then you should leave versus engaging in acts that benefit you but not the company.

– Ego and entitlement – In many ways the notions of ego and entitlement are a precursor for some other issues. I think of an army. In theory it’s a large machine of people dedicated to serving a mission greater than themselves, who follow orders almost too well, to a point where you could make the case that such entities take away individuality. And while they may be an extreme on the spectrum, they function well and only well when people are aligned and not letting feelings of self-importance get in the way. The best companies create their own little soldiers, who relish the chance to serve that larger entity. The ones who struggle have employees who feel they deserve more and add friction to the equation as a result. Unfortunately, their behavior while bad is sometimes a symptom of the corporate culture not a cause.

– “Key talent” – A professor of mine once quipped, “If you meet someone at a bar and then later find out they have a drinking problem,… Duh.” The same goes with people. Let’s say you hire someone for their creativity in the art of gray, because they know how to bend the rules. Don’t be surprised if you find them doing things that you don’t know about or feel comfortable with. You didn’t hire them to toe the line, and once the need for the creativity goes, don’t think it leaves them.

– Not listening to true key talent – One of the most powerful takeaways from Enron’s fall is that it takes a wealth of wonderfully capable people to grow a business, but only two to destroy it. The first person is the one who does the action. The second is the person that didn’t head the warnings from others. The disaster could have been avoided in many ways, through some decisions, but chief among those ways was listening to the people who recognized an issue. Startups can take an all or nothing approach, but that doesn’t work so well with presumably stable public companies.

– Nepotism – It’s never a problem to hire friends and family. Startups especially thrive on that because it’s often friends and family who will work hard for less, or at least work for less and during times that are uncertain. But, those same early assets can easily turn into great liabilities later. Even when companies and managers don’t mean to give preferential treatment, actions can easily be viewed that way by others. And, heaven forbid you hire a friendly who is just wrong, it’s all the more reason to have a solid base of real talent to run the show. Just make sure they don’t get tempted to start looking out for themselves.

– Confrontation now/lower profits now or shame later – I am certainly the expert at postponing painful events and other forms of confrontation, but what is hard to keep in mind is that time acts logarithmically, so each delay doesn’t just add a little additional future pain, it adds a lot. In the pressure to hit certain targets, avoid showing mistakes, etc., it’s too easy to want to do anything but deal with the facts now. Enron could have avoided going under by admitting to some of the crap investments that would have hurt them initially but not ruined them ultimately.

– Good economy vs. bad – If anything, the story of Enron shows how a rising tide lifts all boats, even one with a big hole and all anchors down. In a normal world for example, you couldn’t sign a high level business development deal that doesn’t generate revenue but does have promise to and use that as the basis for a public spinoff. A moral of their story seems to be that in tougher times, we can avoid some of these issues because people have a more realistic view of themselves, the job market, and the work needed for success.

Ultimately, it’s real simple. If you are wondering whether to do a particular act, and the above doesn’t help qualify it, use our simple checklist:

Is it crazy?
Is it based on secrecy?

Would others internally and/or externally find it sleazy?
If the answer to any of the above is yes, especially to the third one, then don’t do it.

Courtesy of DM Confidential editor.

1 COMMENT

  1. I’ve sold performance and CPM, in the employ of large networks and independently. It is interesting that this editorial/opinion piece seems to suggest only performance marketers sin in the ways described. Across a span of three decades in traditional and interactive advertising, I have witnessed such transgressions from virtually all industry segments. From worldwide agency conglomerates to local shops; from networks to sites/stations/publishers; from rep firms to independent brokers — None are immune. Why disparage performance marketers, who, certainly more so than the average, provide services that are tied directly to customer ROI?

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