This week I was in Dubai training executives from various industries (Software – Construction – Recruitment – Insurance – Retail – FMCG) how to build a successful compensation plan.
The mantra we use at Mastermindset is that ‘Everything is Behaviours’ and that is one of the hidden opportunities that has always stood me in good stead when it comes to sales compensation plans.
The training we put together has five key areas. We want to share insight on one of them today so you can plan and succeed:
Incentivising the behaviour of salespeople
Compensation plans are often run by Finance and that makes a lot of sense. It’s financial modelling. You need to calculate the profit and variables that drive the bottom line you need and balance that with the incentives you offer people to drive their performance.
Salespeople are followers by nature
If salesperson A sees that salesperson X is winning by doing something in particular, then they copy them. Salesperson A becomes B, C, D and E and onwards and upwards, as best practice gets copied person by person. That’s how it works; what salesperson X is doing can be good or bad relative to the company’s point of view, but that does not matter to the other salesperson because they have a job to do, bills to pay and a bonus to obtain.
The problem is that unless you incentivise the right behaviours, you risk the potential for both good or bad behaviours to be copied; that’s how behaviour change works. To combat this and gain control, you need to anchor your compensation plan with behaviour-based performance incentives and reinforce those ideal behaviours.
For context, some fairly common issues I’ve found in the past decade (and which remain current issues, as confirmed by the Dubai class):
- Salespeople don’t understand the math behind the plan
- Contracts being signed by customers were too short-term
- The mix of products being sold was not in line with where the profit sat.
For the purposes of completing this circle of behaviours, let’s imagine those are your three problem areas.
The math does not have to be as difficult as we make compensation plans. At the end of the day, if the employee cannot understand the cause and effect from their behaviours to the financial end result, you are missing the point.
Make the math easy and then put in a process where you celebrate examples regularly when someone has done something to match the behaviours (and thus revenue performance) you desire. Just make sure that the types of examples being celebrated are variable; if it’s just the biggest and best deals, then your top 5% of performers get talked about repeatedly and that drives down the motivation of the rest.
My solution is to add variable examples and to use them at each level; the more you process this, the more you win. You can think about this in three levels:
Sale of the week – call out the details, not the just the largest win.
Solution of the week – hunt the HOW, such as techniques, methods and contract durations.
Implementation of the week – seek the WHY of the customer’s happiness.
Sale of the month
Solution of the week
Implementation of the week
Sale of the quarter
Solutions of the quarter
Implementation of the quarter
Now you have a process where success is celebrated and not just the largest wins. We often focus on the biggest sales – the logic of this is because it drives company performance – but at what cost? I am not saying don’t celebrate the big wins, just don’t make it the only focus or you risk demotivating everyone else. The purpose of a compensation plan is as much about motivation as it is remuneration.
A compensation plan can of course be for salespeople (B2B, Retail, whoever helps bring in money via customer interactions) but also for Marketing, Procurement, Service, Project Management and – when done well – an incentive for all employees. You just have to ask yourself one simple question:
Will each employee be able to relate to the incentive as they execute their particular day to day role?
If the answer is no, then you need to create something they can be measured on which is practical to their role. It’s very common to have a plan for non-salespeople that is based only on the company performance; psychologically, this is a negative impact scenario as the employee likes the incentive but can’t draw a direct line to what they can do to drive company success. Sure, they may think ‘well, I could be quicker at doing this, or turn up on time’, but the challenge with this is that they may think it’s too obscure. We are in a metric-based society, everyone has a targeted activity you could measure as part of this exercise. Find it, use it, motivate everyone in their day-to-day work life and you will see the impact in the productivity, focus and behaviours of your staff.
Drop me a line if you want to discuss this further.