Monday, February 22, 2010
Are Sales People Coin-Operated?
By David J. Cichelli, Senior Vice President
The Alexander Group, Inc. dcichelli@alexandergroupinc.com
Are sales people coin-operated?
A quick and convenient answer would be an affirmative, “yes.” However, upon closer examination, this common refrain hides some revealing observations. We suggest here that these hidden observations, once considered, will lead compensation designers to better sales compensation solutions.
What Does “Coin-Operated” Mean?
At face value, the expression “coin-operated” suggests that sales people respond only to pay incentives, which sales management uses to manipulate sales personnel actions. It also implies that the sales force is somewhat immune to other forms of managerial oversight. “Unless it’s in the pay plan, it won’t get done.” Further, it suggests a negative view about sales personnel and their professional values. At best, it implies sales personnel are self-absorbed, not concerned with serving the best interests of the company, and will only perform if bribed into action. This moves incentive compensation into a marquee sales performance role, a dubious location.
But Sales Compensation Works, Right?
Yes, it does work. But the simple phrase “coin-operated” relegates sales people—their ambitions, their character and their intellect—as subordinate participants in a Skinnerian science experiment...by offering a bigger block of cheese to make them run faster. This represents a painful and flawed view of sales people (not to mention of mankind in general).
A better starting point is to understand why sales compensation works. There are numerous motivation theories that explain why people do what they do. (See author’s notes about motivation theories.) When viewed collectively, these theories suggest people’s actions are driven by one or more of the following factors:
• Economic. Sure, economic reasons drive a lot of behavior. Defining the word “economic” broadly allows us to include not only money, but also health protection, security, wealth, physical safety and purchasing power. Sales compensation payments are a natural fit for this factor, but not universally. Sales compensation payments, for example, do not fully satiate the need for security and physical safety.
• Social. When people think about and act upon what others think about them, we are tapping into their social psyche. As a general rule, most people want to receive positive recognition and live in harmony within their social environment. People gravitate to actions that earn themselves positive feedback and avoid performance that garners negative feedback. Measurement (with or without money) is a compelling social lever. For some people, their tribal instincts make them eager to conform to the social norms of a sales team, for example.
• Self-Construct. Often cited as the “wild card” in human behavior, a person’s “selfconstruct” provides an inner voice that answers the question: “What is right for me?” Self-constructs can be enduring, maturing or ephemeral. An important component found in self-constructs is the pursuit of self-accomplishment. Each of these factors meanders and crisscrosses each other, then doubles back. The point is: No matter how much we want to, it’s not easy to reduce humans to a presumption; this includes sales people.
Lessons for Sales Compensation
Now that we know sales motivation is much more than pay rewards, we can correctly calibrate the use of sales compensation. Here are some principles of sales compensation effectiveness that have served others well:
• Sales Culture Counts. What sales management says is important and thus becomes important to most sales people. People’s social/tribal instincts tell them to earnestly serve sales leadership’s objectives.
• Measurement Drives Performance. No need to clog the sales compensation program with every performance measure. People’s inner self-construct and their social accountability have them respond favorably to performance measurement— even without incentive compensation payouts.
• Aggressive At-Risk Pay Is Not Necessary. Setting aside the economic model of income producers (such as stock brokers, real estate agents and life insurance sellers) who earn a percent of everything they sell, regular sales personnel do not need a lot of at-risk pay to drive performance. The deepest pay mix should not exceed a split of 50/50 of total compensation divide between base salary and target incentive. The average pay mix of B2B sellers is about 70/30. Use higher pay mix for high persuasion jobs, less pay mix for lower persuasion sales jobs.
• Limit Performance Measures. To improve the connection between performance and rewards, keep the number of performance measures to three or less. Avoid using the incentive program for corporate measures, compliance measures and
activity measures. The message of the pay program gets lost when pay plans have too many measures.
• Match Job Content. Craft sales compensation plans to match job content. The number of plans should be equal to the number of jobs. Sales compensation is an effective tool to complement management practices; it’s not a substitute. And, for goodness sake, never presume sales personnel are a coin-operated
sub-species.
Author’s Notes on Motivation Theories
Sales compensation design professionals should be well-versed in motivation theories. Victor Vroom’s Expectancy Theory, as presented in his original 1964 book Work and Motivation, offers the best model to explain the dynamics of sales compensation. To learn more about motivation theories, visit the web-site www.changingminds.org. The section that presents a succinct overview of numerous motivation theories can be found at: http://www.changingminds.org/explanations/theories/a_motivation.htm.
For over 20 years, The Alexander Group has engaged with our clients to design best-inclass solutions — those that drive sustainable, profitable growth. Using market information, advanced analytics and best practices principles, we help management deploy the right mix of channels, sales effectiveness solutions, and field programs. The Alexander Group uses a variety of innovative analyses and assessment techniques that accelerate the process — our clients benefit with increased marketing and sales effectiveness and rapidly improved sales results.
The Alexander Group, Inc. and all other trademarks indicated as such herein are trademarks of The Alexander Group, Inc. All other product or service names are the property of their respective owners. ©2010, The Alexander Group, Inc.©
Thursday, November 5, 2009
Public Policy Impact of the New Administration on Total Rewards
For many compensation and benefits practitioners, sorting through the dizzying array of legislation and legislative developments in play that potentially impact the field of total rewards, is an overwhelming task. Join Cara Welch, Director of Public Policy, WorldatWork, as she cuts through the mountains of information to hone in on what is important to our profession. Cara will share key Total Rewards ‘hot topics’ to watch and what to expect from President Obama and Congress on the issues. Learn how the workplace will be impacted by new laws, like the Ledbetter Fair Pay Act, and potential changes in executive compensation, healthcare, retirement plans, work- life and other issues. Cara is responsible for anticipating and addressing regulations and legislation that could affect compensation and benefits practitioners. She has more than 16 years experience in public policy and government affairs and is a member of the DC Bar.
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Thursday, February 5, 2009
The Power of Employee Recognition
Presenter: Stan Striker, Vice President Client Services, Maritz Motivation
The state of the economy has many companies struggling with the dilemma of how to do more with less. In the face of lower merit budgets and no bonuses, employee recognition can be a powerful motivator. Organizations where employees have above average attitudes toward their work (high employee engagement) have 38% higher customer satisfaction scores, 22% higher productivity, and 27% higher profits, according to a Gallup study (Impact of Employee Attitudes on Business Outcomes). Recognition creates positive energy by acknowledging a range of performances that support business objectives such as: innovation, teamwork, leadership, and ultimately customer satisfaction.
Stan Striker, Vice President Client Services at Maritz Motivation, will review highlights of research for the workplace, and the impact recognition programs can have. Attendees will learn best practices around designing employee recognition programs and tips on how best to communicate and implement these programs.The state of the economy has many companies struggling with the dilemma of how to do more with less. In the face of lower merit budgets and no bonuses, employee recognition can be a powerful motivator. Organizations where employees have above average attitudes toward their work (high employee engagement) have 38% higher customer satisfaction scores, 22% higher productivity, and 27% higher profits, according to a Gallup study (Impact of Employee Attitudes on Business Outcomes). Recognition creates positive energy by acknowledging a range of performances that support business objectives such as: innovation, teamwork, leadership, and ultimately customer satisfaction.Stan Striker, Vice President Client Services at Maritz Motivation, will review highlights of research for the workplace, and the impact recognition programs can have. Attendees will learn best practices around designing employee recognition programs and tips on how best to communicate and implement these programs.
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Thursday, November 6, 2008
The Power of Integration: Cracking the Code on Rewards
and Talent Management
Presenter: N. Fredric Crandall, Ph.D., Senior Consultant,
Compensation Practice, Watson Wyatt Worldwide
The Power of Integration: Cracking the Code on Rewards and Talent Management Fred Crandall will present findings of the Global Strategic Rewards® Survey, conducted by Watson Wyatt Worldwide and WorldatWork, representing a total of 1,389 organizations across 37 countries. He will provide insight into how companies in Asia-Pacific, Canada, Europe, Latin America and the United States are using their reward and talent management programs to address contemporary challenges. The findings demonstrate that organizations applying an integrated approach to reward and talent management across all stages of the employment life cycle have an advantage in attracting, engaging and retaining the talent they need to succeed in their markets — and financially outperform their peers. This report identifies the best practices of high-performing companies and offers the business case for an integrated approach to reward
and talent management.
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February 5, 2008 Breakfast Meeting at The Fawcett Center
Health Management as a Serious Business Strategy
Presented by: Dee Edington, PhD, Director
University of Michigan Health Management Research Center
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(A second window will open up, click "Open" and the presentation will launch.)
For the past 30 years the University of Michigan Health Management Research Center has centered its work upon the total value-of-health attributable to total population health-management. When combined with a “Do-Nothing” strategy, it is clear the escalation of disease costs and the cost of lower productivity related to lifestyle factors is unsustainable in America.
This presentation will:
· Illustrate the impact of the “Do-Nothing” strategy
· Present the business case for effective health management programs
· Identify six major components of Next Generation Health Management programs that help companies achieve zero trend in healthcare costs and other important economic indicators.
March 20, 2008 Breakfast Meeting at The Fawcett Center
The Evolving Relationship Between Compensation and Talent Management
Presented by: Donald Hay and Alex Weisgerber, Towers Perrin
Many factors in today's competitive economic/business environment are causing organizations to place a renewed focus on talent management. As compensation professionals set policy and design programs, they are increasingly finding - and creating - important links with the organization's efforts to manage talent. During our presentation, we will provide an overview of how, over the course of several client engagements, we have increasingly used compensation-focused tools to support clients' talent management agendas. Our discussion will also explore several new, related topics, including how an integrated compensation and talent management framework might be leveraged as a retention mechanism for high potential employees and how organizations can measure the ROI of an integrated framework.
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