Comments on: Commission: Baby Steps!

By: Bibelheimer . Info » Commission: Baby Steps! | Sales Strategy for Executives

Mon, 05 Apr 2010 04:19:57 +0000

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By: Commission: Baby Steps!

Commission: Baby Steps! — Tue, 22 Sep 2009 11:45:45 +0000

[...] http://www.executivesalesstrategy.com/2009/08/24/commision-baby-steps/ [...]

By: Scott Barton

Scott Barton — Sat, 05 Sep 2009 05:28:20 +0000

I agree with the premise. Point-of-sale incentive opportunity becomes less motivating as the sales cycle increase. But the sports analogy doesn’t fit an absolute position here. Generally, sales professionals engaged in strategic selling environments get paid a base salary that exceeds the target incentive opportunity. So like the football player, the sales person gets paid for activities that contribute to the end goal. Athletes with direct accountability for scoring points actually do earn proportionate to their scoring frequency (think the Bill’s Rian Lindell earns 3x more than the average place kicker for the stuff he does prior to scoring?). For positions with indirect accountability, like linemen, it’s all about activities — they needn’t get paid for scoring because it’s not their job.
Certainly, scoring or sales frequency contributes to motivation. It’s tough to get excited about something that won’t happen anytime soon. But disciplined professionals stay focused on the goal, and instinctively do all the things that will help achieve that goal.
Paying salespeople for activities or pre-sale “milestones” is practical for those covering undeveloped markets with infrequent sales opportunities. But as the market matures and the opportunities become more frequent, the milestone approach becomes a poor substitute for paying on what matters. The activity deviation between individual salespeople is slight relative to sales performance, and thus the value between par performance and excellent performance isn’t enough meaningful for scalable performance increases.
There is a practical application for tying incentive pay to pre-sales activities, but the principle is counter to what drives salespeople, and hard to swallow given the current financial health of many enterprises.

By: Jinny

Jinny — Sat, 05 Sep 2009 00:21:16 +0000

Super post, Need to mark it on Digg

By: Donya Rose

Donya Rose — Fri, 04 Sep 2009 14:27:34 +0000

Fabulous discussion! Long sales cycles present some of the biggest challenges to sales compensation plan design (and the most interesting problems!).

Regarding whether or not incentives actually help at all, the best piece I’ve read on the subject is “Rewards and Intrinsic Motivation” by Cameron and Pierce. It’s dense and academic in tone, but I’ve read the whole thing and found that the key points relevant to sales compensation design from the book are the characteristics of effective rewards. According to Cameron’s and Pierce’s research, incentives and rewards are most effective when…
1) Used for the benefit of the employee(not just to create benefits for the employer)
2) Focused on challenging activities (not on activities that employee sales people already like to do)
3) Tied to specific reasonable, objective, and attainable standards of performance
4) Accompanied by celebration of significant successes by the organization.

In addition they note that, “Reward systems that are discretionary, subjective, or based on pleasing the people in charge are often seen as unfair and coercive. What is ‘good’ today may not be good enough to earn a reward tomorrow.”

There is substantial written work questioning the effectiveness of incentives in creating sustainable healthy motivation. This book takes this question on, focusing mostly on the education and compensation application of the principles.

By: Chethan Prabhu

Chethan Prabhu — Thu, 03 Sep 2009 15:21:39 +0000

Having worked with sales people for more than a decade, one thing I have learn’t is that sales people know how to maximize an incentive plan. If the plan pays for activity, then there will be lots of activity! I also agree that the plans can drive the wrong behavior. But I would attribute this to bad plans than just a general statement that incentive plans do not drive the right behavior. If a rep can easily figure out how much she will make for every deal without having to use an algorithm, it will drive the right behavior. Many companies fall into the trap of using incentive plans to ‘manage’ reps Vs rewarding them for a job well done.

By: Steve Dodd

Steve Dodd — Thu, 03 Sep 2009 12:50:49 +0000

Eric, as you know commission plans are very complex. But they are developed with one goal in mind; To manipulate the sales organization to achieve the corporation’s revenue objectives.
I most certainly like your approach because many corporation’s objectives have changed from “get the order, no matter what” to “get the order by following this process”. Most sales training is based on process based selling, most CRMs are based on process based methodologies but most (if not all) comp plans are based on “get the order, period”. Process goes out the window in the final stages of the month / quarter / year (from the field to exec management).
The best sales people actually know how to manage (manipulate) the comp plan. If you want process and structure verses “Cowperson (by or girl) selling, adopt this strategy as you’ve suggested. If you explain it to the CFO that way, it’s an easier internal sale because they understand process and are the first to complain when it’s not followed.
That being said, the lions share of the comp still must be on the order or the sales comp manipulator will quickly get bogged down in process and learn how to blame it for poor productivity.

By: Richard Dickerson

Richard Dickerson — Thu, 03 Sep 2009 11:57:48 +0000

The intrinsic consideration is key I believe. While sales certainly does reward economically motivated people it is not the ONLY motivator. The issue is attempting to provide systemic solutions to an intrinsic issue. In fact, numerous studies, "First Break all the Rules", by Buckingham and Coffman citing the Gallup studies,and "People don't leave their job, they leave their Bosses" by Kevin Kelloway point out that top performers are more energized by the "chase" and winning. It's a matter of knowing the intrinsic motivators of the sale people and building both the team and the compensation around both. Excellent article.

By: Chris Streete

Chris Streete — Thu, 03 Sep 2009 09:28:15 +0000

Is there not a case that says milestone based incentives for challenging sales environments (i.e. economic down turns, early adoptor product, new market, new region etc) as described above; and Deal-Close Rev focused comission plans in upturn, mature markets, to turbo charge growth thro close rates.

By: Ben Turner

Ben Turner — Tue, 01 Sep 2009 16:50:22 +0000

I agree, i like this article, good points, and also helps to focus the sales exec as well. I do reserve the right to ensure sales professionals are also ultimately revenue driven and that commission schemes should be in relation to company performance.
I have worked in environments where the SD has complicated the procedure with accelerators etc the individual is just encourged to sand bag, hold back sales, and spend their time just trying to cheat the system.
The key here is that the exec is paid or rewarded for anything that adds value to the organisation, an approach that i believe should apply to every part of the business, not just sales.