Sunday, September 21, 2008

If You Comp Them They Will Come The Simple Way To Motivate Your Sales Force

Writen by Patrick Gray

In most companies, the sales force is the most loved and simultaneously feared organization in the company. Often perceived as the corporate "breadwinners," any attempt to change the behavior or process of the sales force is met with skepticism and trepidation.

"You just can't risk upsetting the sales force! Do you know how much revenue is at stake here?"

Any initiative or strategy that might change the way sales works, or perhaps more closely track what it is the sales forces actually does is perceived as a threat in all levels of a sales organization. New systems or processes mean only one thing to sales: a learning curve that means less time to sell, which in turn leads to lower commissions. Therein lies the simple answer to all change management challenges when dealing with a sales force: commissions.

Arguing that commissions are the key lever to influence sales may seem to imply that salespeople are a bunch of money grubbing capitalists, forsaking all else in pursuit of the almighty dollar. This however is largely untrue, rather the sales force is one of the few areas in most corporations where a very simple metric, and corresponding lever exist to manipulate behavior. Commissions are both a key part of compensation, but also a hard, numeric metric to indicate how well a particular person has performed. If Jane received higher commissions than I did, there's a very strong case that can be made that Jane is a better salesperson than I.

Whereas many positions have complex evaluations, peer reviews and other "soft" analysis, in sales, you either made the sale or you did not. At the end of the day, a customer needs to cut a check to pay for the sale, so you know exactly what that sale brought in to the company's top line.

At their most simple level, commissions give the salesperson a "piece of the action" they generate, and encourage a beneficial behavior: selling more products. This is where some level of sophistication enters the process. Rarely does a company simply give a salesperson a fixed percentage of each sale, rather higher margin deals usually receive a higher commission, or new product sales are rewarded more than sales of an older product to an existing customer. Combining your commission model with your process improvement strategy is where the magic happens. If your sales force is consistently selling products in a manner that creates extra labor and sunk costs on the backend, change your commission model to encourage sales that follow the new and improved process, and generate higher profit on the bottom line rather than big dollars on the top line. All it takes for the new commission model to be wholeheartedly embraced is for one salesperson to get a higher commission using the new model, or for a hard line rep to lose his ticket to the annual sales meeting in Hawaii before word will spread that the company is serious about change.

I'll never forget a discussion I had with an Operations Exec at a large office equipment company, which I'll call BigCo for the purposes of this article. He had recently assumed the new role, and was telling me of his first experience with Sales leadership. A SVP had come into his office the prior week and proudly announced that one of the sales reps was closing a multi-million dollar deal with one of the large overnight package handling companies. The sales rep had promised that BigCo would move all of their shipping to this carrier and hand wrote this clause into their contract, and the SVP was thrilled that this deal would put sales well ahead of its quarterly revenue metric.

The operations exec, who had just signed a multi-year deal with their current carrier, and recently completed a nine month project to optimize BigCo's logistics operation, was stunned. He did some analysis on the costs of switching carriers and revamping the systems and processes he had just put in place, and even with the million or so of revenue generated by the sale, the entire deal would result in the company losing two to three times as much. On their next meeting, the operations guy tore up the contract in front of the sales SVP, to dumbfounded silence. Even with the reams of figures showing how detrimental the deal was to the company as a whole, he still spent quite a bit of time on the sales forces' "Top Ten Most Wanted" list.

The moral of this story is that sales comp must be analyzed from a holistic perspective. What is good for sales may not be good for the company, and the implementation of new systems or new business processes is the perfect time to perform this analysis and determine an appropriate commission model. Make no mistake that this is difficult work, but once completed, getting the sales force to change is as easy as sending out an email detailing the new commission model. Old behaviors, which were not profitable to the company as a whole should not be highly compensated (if at all), and profitable deals, which use the systems and processes correctly should be the most valuable to the salesperson. As soon as reps realize the new plan is there to stay, more "good" deals will begin appearing almost overnight.

The magic here is the simplicity of implementing the change. Existing motivational structures such as compensation, bonus programs and free trips to an exotic location are already in place, the new commission model simply changes the focus from what is good for sales to what is good for the company as a whole. If a new CRM system is deemed as good for the company, the commission model should provide compensation if a deal is correctly entered into the new system, and reduced commission (or no commission) if the systems and processes are not used. If you want to get even more rigorous, you could track the time required for back office processing of a sale, and deduct compensation for difficult to process (more costly) deals.

Despite all the dire predictions on sales acceptance of a new system or process change, like any other employee most salespeople want to be high performers (if they do not, they should be shown the door, but that is a topic for another time). If you add systems and overhead without showing any benefit, in the form of commissions, your company will join the litany of those complaining about and fearing their sales forces. If your commission model is designed to reward use of tools that benefit the company as a whole, not only will your sales force rapidly accept the new systems and processes, but will be bringing in new business that provides the highest margin for the entire company.

Patrick Gray is the President of Prevoyance Group, the leading consulting company dedicated to helping companies ensure their large IT projects deliver organizational value on time and on budget. To find out how to increase the value produced by YOUR IT organization and become a hero in the C-suite, please visit for a complimentary whitepaper.

medical health hospital

No comments: