Stop Believing the Pay Plan Will Ever Make Your People Happy
We bumped into Sean at the company headquarters where we had trained him four or five months earlier in the complex sale. He was applying his new knowledge religiously and had really upped his game. He was six months into the year and he had already achieved over 80% of his target.
Normally he was a really upbeat kind of guy, but that day he was looking a bit ragged. We asked what was wrong and Sean said, “I just got a target adjustment - from $7m to $18m.”
In the blink of an eye, Sean went from a terrific year - his best ever - already over 80% of target, to a little over 30% of target with his new number.
In a perfect world, pay plans for salespeople and managers would reward people for excellent achievement in a fair and transparent way.
Unfortunately, we don’t live in that world, and pay plans usually top the salesperson’s list of imperfections. We find that many companies do the following genuinely ‘stupid’ things:
Penalize top performers for being at the top by having their bonuses capped. They might sell four to five times as much as the next person, but make only marginally more in compensation.
Reserve pots of profit from the previous year’s sales to pay out the current year’s bonus plan - its value carries no relevance to the sales being made this year.
Claw back commissions for missing a margin target, a sales target, or experiencing a partially canceled sale. It may be justified according to the fine print, but it is demotivating when it is invoked.
Create short-term comp plans that conflict with longer term company goals, causing salespeople to take smaller sales instead of creating larger deals that take longer to close.
When we ask them why they continue these self-defeating activities, they cite reasons such as:
‘People will coast and get lazy if we overpay them.’
Our go-getter top sellers will earn more than our senior managers or, worse yet, our CEO!’
‘An unscrupulous employee will game the system and screw the company.’
‘Someone will get ‘lucky’ and land a big deal just by being in the right place at the right time.’
They wind up with compensation plans that are lengthy, complicated, and over-stuffed with conditions and qualifiers. Their salespeople are confused and discouraged. As one seller said to us, ‘The plan seems designed to pay us as little as possible.’
Unfortunately, the care taken by a company to defend against moral hazard, ironically inspires people to learn how to game the system.
For example, putting a cap on bonuses or commissions can entice people to slow walk deals and then close them when they know they’re going to get paid. Or they might cut corners and make weak sales that will either unravel or end in customer dissatisfaction.
In our experience, the best pay plans are:
Simple - They have few moving parts, clear rules, and can be explained in one page or less. Ideally, your salespeople can close a deal and know exactly how much money they just made. Salespeople thrive on this kind of instant feedback.
Uncapped - Let your sales reps dream about making big bucks. Give them the opportunity to make more than you, or anyone else in the company.
Balanced - Design salary, commission, and special bonuses play complementary parts.
Provide a salary that is sizable enough so they won’t be worrying about paying the mortgage or putting food on the table.
Pay a commission so your people create the kind of lifestyle they want for themselves and the people they care about.
Offer special bonuses, which create a dose of variety, and another way to fund what your people care about, while achieving a special objective identified by the company.
Alternatively, if your salespeople are account managers who focus on the entire customer relationship, then pay them a salary that reflects the level of their responsibility. Provide them with a smaller commission and/or bonus so they are rewarded to grow the account, without neglecting their account management responsibilities.
The odds are that your plan needs improvement, and it may even have gaping holes in its fabric. Here’s what we suggest:
Stop defending an imperfect plan! Admit that it is not working and commit to fixing it. Keep your staff posted on your progress, and be honest about what it involves..
Push for simplification - and eliminate as many conditions and exceptions as possible.
Keep fighting for ways to reward and recognize your top sellers and the people who are doing everything right because they are your future top sellers. Even if all you can do is take them out to dinner, do it.
Your sales team needs you fighting their corner with senior management. It's important to remember that companies don’t often lose profit by paying sales people too much commission. They do lose profit every day by not paying them enough.
It's also important to remember that your team's compensation is never enough to keep them happy. Income is important, but your staff is more likely to stay selling for you because of the extra effort you make to develop their ability and create a team worth playing on.
Stop Wasting Money on Sales Training
‘I’ve just discovered that I’ve got a sales problem!’
The speaker was Christine, a very thoughtful L&D person who had hired us for two contracts with her company. We had invited Christine to take part in our sales training program, and she had been an intelligent and enthusiastic participant.
It was two weeks later, and we were having one of the coaching conversations that follow our training sessions.
‘I’ve had three vice-presidents call me this morning. All three want ‘more sales training’ for their teams. This is the sort of request I’ve been living with for two years, and now I see what’s wrong with it. They have no idea of the problems they are trying to solve!. They just want to throw ‘training’ at their sales teams and hope everything works out. When it doesn’t, we just do it all over again!
If your company has a thoughtful, integrated sales and sales management training program that has been designed for your business, is executed with discipline, measured for results, and continually embedded month after month by sales managers, consider yourself fortunate indeed. You’re in good shape.
Many companies, however, just can’t seem to figure out how to get from where they are to where they want to be in sales. They either waste a lot of money trying one thing after another, or they waste a lot of money trying to hire the right salespeople, letting go of those that don’t produce, and then starting all over again.
It is these companies that are searching for a way forward. If you’re with one of these companies, you have a role to play in helping them find their way. You’re on the front lines, you see salespeople struggling, and you’ve probably got some good ideas about what is needed.
If you’re going to help your company find the right kind of sales training for the people you manage, and for yourself, it helps to address head on some of the falsehoods that prevent executives from investing wisely in the training of their sales force. Here are some of the key misconceptions that are in the way of transforming a sales force:
Salespeople are born, not bred. Sales is a science as well as an art. The problem is that our academic institutions haven’t fully appreciated that yet. There are many courses on finance, strategy, marketing, supply chain, product production, and business strategy but virtually none in sales and sales management.
When companies don’t know that sales is a profession that can be taught, they spend enormous amounts of money searching for ‘proven’ salespeople. Sometimes it works out, often it doesn’t. And, companies wind up with no common understanding of how they sell and, often, with prima donnas who don’t play well together.
The truth is that anyone who wants to sell can learn to sell. It's a profession just like any other – and a lucrative one at that. Great selling leads company growth. Isn’t it time to learn to do it right?
‘We can’t train anyone until we weed out the people who aren’t going to make it.’ This is a variation on the ‘born, not bred’ theme. Companies spend money on testing programs to identify those who ‘just don’t have the profile to succeed in sales.’
It would be difficult to express just how offensive we find that approach. Suffice it to say that it wastes further time and money, enrages your sales force who feel unfairly judged, and – again- misses the point that anyone can learn to sell and sell well.
‘Sales training is like every other training – you attend a class and then you go make it work.’ This belief leads companies to hire one training supplier after another. The latest ‘flavor of the month’ shows up, provides a few days of training, hands out a happy sheet at the end of the training which reports satisfied customers, then leaves town glibly saying, ‘You now have everything you need to succeed.’
Sales is not like other professions. It requires people who can maintain an attitude of possibility under enormous pressures, stick to a discipline of leading a customer – often against their will – through a series of steps for the customer's own good, and have the discipline and backbone to only do those things which lead to a sale. I
Furthermore, it's a science that must be learned in the field, applying in real time what was learned in the classroom. Any training supplier that doesn’t provide this follow-up isn’t worth hiring in the first place.
Sales training takes place over time, sales managers have to learn how to be responsible for this development – and this takes consistent, dedicated, skilled facilitation. If companies don’t want to do this, they will be wise not to spend money in the first place.
What can you do to ensure that your company provides training that will actually change things for good?
First, just stop settling for half-measures: ‘sheep dip’ approaches with off-the-shelf- training that treats all salespeople the same, and ‘hit and run’ training programs that promise nirvana in a short period of time. You know better.
Then, start with the following steps and see where your natural smarts take you.
Recruit people for your team who want to be great at selling and who exude a sense of possibility and who love to learn new things. In short, hire for attitude. Competence and execution can be taught.
Find a training supplier who will:
Help you develop a methodology for selling that is customer-centric, works for your business, and provides a methodology that everyone in your company can understand and follow.
Train your people to execute this methodology, help them embed classroom training in the field, and do so in a way that your people are intrigued, enthusiastic, and grateful for what they’re learning.
Train you and all sales managers to shift their leadership style so that they can develop their people to sustain what they learned in their training. This is how you create change over time.
Ensure that senior management is completely invested – that they want to be trained as well about how to lead so that they can do their part to sustain change in the sales force. If they won’t do this, don’t say yes to the training. It will end in tears – lots of money spent, lots of frustration generated, little real improvement.
Commit yourself wholeheartedly to the full development of your people. Use sales training to change lives – first yours, and then theirs – sales success will follow.
Stop Asking Why Things Went Wrong
In sales, as in life, things go wrong. Things turn out differently than we had planned, and mistakes get made.
Customers fall into ‘radio silence,’ refusing to return calls or email. They stop moving forward, they change their minds, they get offended or even offensive.
Colleagues stop cooperating, leave their positions without giving you notice, or they actively disagree over the direction to take with a customer.
Deals fall through that you thought were solid and contracts shrink after you had agreed on a scope of work.
Commitment levels slip, management information is incorrect or missing, and your team come off like idiots on governance calls.
'S***’ happens, right?
And, when it does, the first question that is almost universally asked is why? Why did this happen? Why did they do this or say that?
Why is the wrong question to ask.
First, it’s accusatory in nature. Why did you do this? Why did you let that happen? Why didn’t you see this coming? It’s the question asked by parents, teachers, and others in authority who sometimes made our early years more miserable than they needed to be.
It assumes that the people who screwed up somehow knew better at the time, that they can explain their lapse in judgment and behavior, and that offering this explanation will somehow prevent a similar lapse in the future.
This subtle accusation is felt by the people who are on the receiving end of the why question. They often get defensive, blaming themselves or other people. They stop thinking clearly and they start covering their backsides. The question Why begs people to make stuff up about the stuff that happened. Then things get really muddled.
Most of us don’t really know why something happened. We have our suspicions, our theories, our guesswork - we may even be pretty sure we know - but, in fact, we don’t know exactly why the disappointing things happened.
This is especially true in sales situations, which nearly always involve human beings making assumptions, drawing conclusions, and engaging in speculation – all of which is based on precious little real data.
When a sale falls through, and the drop-down box on the CRM (or your manager, in a one-on-one review) asks why it failed, do you really ever know? Even if the customer said, ‘Your price is too high,’ you know, don’t you, that this is rarely what’s really in the way?
It’s like a golfer who hits a bad shot and then starts talking about how he turned his wrists over, or didn’t shift his weight, or opened his shoulders too quickly. The golf swing is so complex and it happens so quickly that few if any golfers really know what they did wrong.
Why simply generates stories, explanations, excuses, and pontifications. Worse yet, it rarely leads to substantive action that changes things for the better.
Here’s a more effective question to ask when something goes wrong: how did it happen?
How is about action, behavior, and the string of events that led to the failure, the loss or the misstep. How is something tangible because you can diagram it. It’s a progression you can follow: a series of decisions and activities the consequences of which become clear as you lay them out.
The next time one of your people fails, try something different than throwing around the usual explanations.
Let’s say your salesperson lost a deal that you thought was in the bag. Sit down in front of a whiteboard with them, perhaps with a couple of colleagues who were involved in the selling process. Ask how it happened and diagram the series of activities that led to the end result – the lost deal.
1. Start at the beginning - the referral, the initial sales call - and then ask: What happened next?’ Put it on the diagram. Keep asking: then what happened? What did the customer do? The salesperson? His colleagues?
2. Ask for the assumptions that people made, the conclusions they drew, and include them in the diagram. Also include things that people neglected to do, decided not to do, or failed to consider doing. They’re part of the picture as well.
3. You’ll know when you’ve diagrammed enough, because everyone will start understanding the progression of activities that led to the failure of the deal.
4. Then it’s time for everyone to reflect on the next question: What part did I play in this deal going bad? What assumptions did I make? What conclusions did I draw? What actions did I take or not take that contributed to the deal falling apart?
5. Now you can figure out what to do next to either rescue the deal or to let it go and move on to something else.
Evaluating failures and missteps in this way - with no blame attributed and no excuses required - leads to genuine institutional learning. You will finish the conversation with practical, realistic, ideas about moving forward, and people who are committed to the actions you decide to take.
BONUS MATERIAL: Stop Giving People a Second Chance
To improve your ability to really understand what is impeding the sales performance of your people, it helps to listen through the ‘filters’ of Attitude, Competence, and Execution. That way you can apply the right solution to the problem at hand. Here are some ideas of what to look for when you use the RACE® framework:
Look for evidence of Attitude problems:
Are they telling you a lot of stories, or giving you excuses and reasons why things aren’t happening?
Do you hear them blaming customers, colleagues, processes, etc. for their performance? Are they complaining?
Do they appear confident and optimistic, or are they faking it? Or do you see them acting discouraged and lacking direction.
Are they turning up late for meetings or submitting reports?
Does evidence of their work (sales reports, CRM updates, etc.) demonstrate pride and purposefulness or is it messy, incomplete, or hastily done?
Do they make solid commitments to you that actually get done, or do they forget, hedge, or otherwise not completed them? Do they keep their promises to you?
Look to your MI (management information) for evidence of Competence problems:
Slow speed of deals through the pipeline
Low conversion rate
Low sale value
Close date keeps slipping
And look for Competence issues when you are observing them in action:
How well do they connect with customers? Is it too short or too long? Do they put people at ease?
Do they really listen to find the problems their customers are trying to solve? Do they listen long enough? Do they pepper people with questions to force the conversation in a certain direction, or do they follow the customer’s line of thinking?
Are they asking the customer to calculate the cost of his problem if no action is taken to solve it?
Do they respond well to the customer’s expressed needs, or do they give a ‘plain vanilla’ presentation that lacks a compelling case?
Do they close every customer meeting with an agreed, specific next step or do they leave it vague and general?
How well do they handle removing blocks when the customer won’t commit to a next step?
Look for evidence of Execution problems:
Are they seeing the right prospects? Are they seeing enough people?
Are they investing their time in the right activities or are they just staying ‘busy?’
Do they tend to ‘shoot from the hip’ when they visit customers or are they organized?
Are they careful or careless in their sales planning? Are they tracking each step with their customer in the CRM and using it as a forward looking sales tool or are they using it as a backward looking history, constantly ‘keeping it up to date?’
A final word about dealing with attitude.
Unsolved Attitude issues are the number one reason why giving people a second chance rarely works. When your people’s Attitude is ‘up’ and they are fully committed, they can sell brilliantly. They will release tremendous capability to figure things out, work creatively, solve problems and feel undaunted by any challenge. They will take responsibility for their performance and make things happen.
Always address Attitude issues first because this is the component of RACE® that drives change the fastest. After you solve attitude issues, then address competence and execution challenges.
Become great at spotting an Attitude problem early on and address it promptly. Don’t hope it will change on its own. And don’t play the tough guy by commanding your salesperson to change his attitude or else.
Stop Giving People a Second Chance
James was a close personal friend of Rick, who had created a small services company in New York with two partners. Rick hired James to be the first salesperson for the company.
James succeeded in his first three years landing several large contracts, mostly due to his affability and skill in developing relationships with chief executives. His effort was rewarded not only with sales commissions, but also with an informal bonus that he enjoyed as one of the early hires in the company.
As the company added other salespeople, however, James’ shortcomings began to become more evident. His cordiality disguised a deep sense of entitlement that unfortunately was reinforced by several unwise moves by Rick.
First, Rick (quite rightly) passed James over for another person whom he made sales manager over the sales force of eight people, including James. To ease the blow of not choosing James, Rick let James report to him directly. Furthermore, he negotiated a special compensation package for James whereby the bonus was still paid to him, but not to the other salespeople, including the new sales manager.
James’ work was inferior to his colleagues. While he kept ‘wining and dining’ executives and talked about big plans that would soon be sizeable contracts, he generated very little business.
Rick kept making excuses for his friend, alternating between threatening to let him go and giving him yet another chance to prove he could still deliver the goods. Rick knew that James had ability, so he kept giving him the benefit of the doubt, thinking another shot would make things different.
Well, it didn’t and this went on for five years. The ripple effects of this ‘special case’ treatment was like poison to the rest of the team.
There are two types of non-performers: those who are not trying and those who are. We hope you know what to do with the first group! It’s the second group – the ones who appear to work hard but are still not performing – who cause angst in a sales manager.
They’re the kind of people whom you want to succeed. They come into work early and work hard, they play well on the team, and they’re genuinely likeable. They listen to your advice, put it into action, submit reports on time, fill out the CRM, and spend lots of time in the field.
You think they’ve got what it takes or else you never would have hired. You want them to make it. They’ve got families depending on them. But they’re still not cutting it.
You think, ‘If I can just get them over this next hurdle…’ You’ve given them tips and you’ve taught them the tricks. You’ve even closed a few too many sales for them, just to keep them from losing hope.
You don’t want to lose them because then you will have to recruit, induct, and start all over again with someone new. And you probably don’t want to be unpleasant and have the hard conversation to let the guy go. It feels like you’ve got too much invested to pull back now. You’ve got to give them a second chance.
Or do you?
The problem is that a second chance usually leads to a third, a fourth, and a fifth. It doesn’t fix anything if it merely gives people another opportunity to do the same thing, expecting a different result. It's a set-up for failure.
Unless you firmly and directly address the issues that hold your people back, they – and you – are going to keep getting the same result.
You probably weren’t trained how to do this. If you’re like most sales managers, you weren’t sent to ‘management school’ – you were promoted because you figured out how to succeed as a salesperson and your supervisors thought you could naturally teach others how to do what you did so well. You probably have discovered that (a) selling and (b) teaching others to sell are two distinctly different skill sets!
The good news is that, if you’re willing to put in the time, and apply the same brilliance to the latter as you did to the former, you can get very good at it. Here are some ways to improve the skill of developing other people.
Apply your common sense. Understand fully the problem your team member is trying to solve before you start exploring what they should do next. You’d be amazed how few managers actually do this!
So, instead of just giving someone a ‘second chance,’ tell him not to keep doing what he's doing. Instead, immediately set up a face-to-face meeting. Travel if you have to. It's worth it.
At that meeting, listen carefully for half of your planned meeting. Don’t offer advice or solutions. Be quiet, listen, take notes, tell him what you’re hearing, and ask the occasional question to help him identify what's really blocking his performance. Lead him to examine his attitude, his competence, and his execution.
This investment of time can have four significant payoffs:
He will discover things he didn’t know. He will start solving his own problems and come up with ideas about what to do.
You will discover things that you didn’t know. This creates more ways that you can be of help. You’ll know how to target your feedback, suggestions, and requirements.
He will listen to what you say because you listened first.
He will actually commit to the agreements he makes at this meeting.
You no longer have to put yourself in the situation of taking the soft line of giving second chances or taking the hard line of no more chances. Have a different conversation with your salesperson, get a commitment to change, and follow through to see that it happens.
This really gives your team member a ‘second chance’ that probably won’t lead to a third and a fourth chance. Over time, your conversations will be about bigger and better problems for him to solve – and that's progress.