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 cancelled 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 Going the Extra Mile
Rebecca took another sip of wine and looked out over Hong Kong harbor from the deck of the bar where we’d been talking for two hours following the sales management training just completed. We’d shared a very creative and promising three days together, but the enthusiasm with which she’d ended her training was slipping away.
‘There’s so much I want to do with my team,” she said, “and what you’ve given us can really work. But…’, and here she paused, ‘Our sales are down, and I’m about to put my team through hell. We won’t make it if we don’t go flat out.’
You know the temptation. Sales have slipped, and you’re off the pace required to hit your targets. There’s only one answer: work harder - more sales calls, more presentations, more activity poured into the top of the funnel so that more sales will drop out the bottom.
You know you’ve got to push your people. You appeal to team spirit, you point out the heroes who are over-achieving, you offer incentives for over-time, and you lead from the front by canceling your annual leave and spending evenings and most weekends at the office.
You get the 24/7 mentality really ginning. People are working late every night, even on the weekends. They postpone family vacations. You get the sense, ‘we’re going to make it.’ That keeps you and the team going.
Then it’s over. Whether you hit the target or not, it’s payback time. After the full court press to finish the quarter and get the numbers, the hangover hits. Your people are exhausted. They go ‘off radar,’ and you’re left hoping they’re out there making sales calls. Personal days and sick leave are mounting up.
Sales start slipping again, and you know where this is heading. Another round of self-sacrifice is just around the corner.
Working harder is seductive. It feels good when you step in that all-hands-on-deck state of mind. At first, it’s a rush to stand shoulder-to-shoulder with your teammates and go for the gold. However, it’s just a matter of time until ‘feeling good’ gives way to ‘feeling used.’ You wind up with worn out, unhappy soldiers, behind whom are supportive families who withhold their disappointment for a while, but who eventually let the hero know that enough is enough.
Let’s be honest. There are companies who make a virtue of operating this way. They cultivate a Spartan culture in which self-sacrifice is nurtured and rewarded. High turnover of the sales force is accepted as a given - 300% per annum is not unusual - and the subject of work-life balance is addressed with gallows humor and extra drinks after work.
If you’d like to master a different kind of sales career - one that genuinely honors family and fortune - you’re going to need to lead your team to a wiser, more disciplined way of working than they are now utilizing.
Warning: this will not be a quick fix. Your team is living inside a system that is bigger than itself. The ‘we all work extra hard several times a year’ mentality is embedded in your company’s policies, procedures, and systems. Finding another way of operating within this larger system will take all your intelligence and cleverness, but why not go for it? You’ve got to do something when you get up in the morning! Why not do something valuable?
Take it a step at a time. Get your team together, privately and off-site, with time to talk, accompanied with some good food and drink. Tell them that this isn’t a party but a short retreat from business as usual that can lead to an advance in performance.
Introduce the subject of the regular periods of significant overworking that everyone has experienced. Offer your opinion that this isn’t wise or healthy - not for them and not for the company. Ask if they agree and if they are interested in making a change.
If they indeed want to do something different, the next step is to make a long list of everything in company life that makes it easy for them to keep exhausting themselves several times each year. List everything: compensation, target-setting, HR policies, peer-pressure...everything.
Now tell them that since they cannot control any of these things, they must let go of hoping that any of it will change! If it does, that’s icing on the cake, but you’re inviting them to change what they can change.
If they are still interested in changing things, ask each person to pick three things that they can do differently now so that the next period of overwork won’t have to be so demanding.
Within one week, have one-to-one meetings with each person to clarify what they’re going to do differently. Then, meet with them regularly to lend your support to them doing those three things.
You'll be very pleasantly surprised at what happens.
Stop Listening to Your People
For our first contract with a global telecommunications company, we were mentoring a senior executive who was on the fast track even though he had no sales experience.
We asked to observe him holding one of his regular meetings. He held a conference call every Thursday for one hour at 4 p.m. with his staff. Each of the sales reps spoke, one at a time, reporting on their work. Our client listened and then told each person what to do. The call went on and on.
Afterward, we asked him how he thought it went. He said, ‘It went well. Everyone had a chance to speak, they got to learn from each other, and I gave some good advice. What did you think?’
‘Well, I said, ‘I’m pretty sure that nearly everyone was tuned out except when they were talking to you – and I don’t think you have much to show for the hour spent.’
After I had given him the data behind these conclusions, he agreed.
You are meeting again with one or more of your salespeople. It could be a team meeting, a one-on-one catch-up, a deal review, a trouble-shooting conversation, or a monthly update to discuss activity reports.
About fifteen minutes into the meeting, you suddenly realize that you are completely and utterly bored.
You’ve heard it all before – just last week, in fact! The same stories, the same explanations, the same reasons why deals have slipped.
You feel yourself getting impatient, but you hold back from letting it show. You are doing management by listening, just like you were taught. So you ask more questions – open-ended of course – but all you hear is more of the same why sales aren’t progressing.
Now you’re getting irritated. You insert more incisive inquiries to drill down into what’s really happening, but you just keep getting the same story told from a different angle. Finally, with time getting tight, you ask for pledges of what’s going to happen by the next meeting. Your skepticism rises as you listen to a familiar litany of promises, and you doubt that anything much will come of it.
We actually are big fans of listening, especially when it’s done right. Skilled listening can lead to true learning, and that gives you something new to work on – both with customers and with your sales force.
However, we’re not fans of story-telling, hypothesizing, or fiction of any kind. It is this ‘moving the air around’ that most management-as-listening enables. It takes an enormous amount of time – usually in conference calls or long face-to-face meetings – and it just doesn’t produce the insight and activity that will really change things.
A lot of management conversation fails to produce results because:
First, it fails to deal with facts and face reality – grounded in hard data, recognizing the unknown, free from assumptions and speculation.
Second, it usually ends up either assigning or avoiding blame – roasting someone on the spit or protecting one's own butt from the heat.
Third, people fail to notice and admit to their own part in a given mess, and therefore they cannot wisely identify and commit to actions that will create the results they seek.
So what can you do instead? Try this exercise – best done with a team – to help them face reality and commit to activity that will bring different outcomes.
Draw two columns on a piece of paper and have your team members list all their targets down the left hand side (outputs and inputs).
In the right hand column, have them list anything that could realistically get in the way of them achieving their targets.
Tell them that – at the end of the target period – they will either have achieved their results or their reasons why they didn’t. But they won’t have both.
Help them admit that the odds are high that some of those right-column things are going to happen.
Ask if they will commit themselves to their targets even if those things happen. Don’t go to step 5 until they really make the commitment. Stop the meeting and reconvene later if needed.
Tell them that now they are ready to develop a plan to succeed. Ensure that they do.
That will get the conversation moving in a different direction.
Stop Talking
‘Here we go again,’ said Anja, as she dialed the series of numbers that would connect her to the bridge line for the monthly ‘all-hands’ communication to the sales force.
‘This is always so incredibly boring,’ she said. ‘It’s always the same message, every month - blah, blah, blah, go get ‘em. ‘
‘It never makes a difference,’ she continued. It’s just words being poured over everyone. Nobody’s asking what the sales people are thinking, what they really think is needed. Managers just keep on talking and nothing changes.’
Anja heard the moderator signal the start of the call. She took a breath and started delivering her monthly message to the sales force.
This won’t take long.
You talk too much. You know it. Your people know it.
Shut up and start listening more.
OK, we’ll be a bit more helpful.
Talking too much is the greatest mistake that most sales managers make.
They give too much advice.
They tell too many stories.
They jump in too quickly.
They keep trying to fix things.
They offer too many solutions.
They say the same things over and over again.
The next time you’re tempted to start talking at your people, try something different. Admit that they’ve already learned plenty from you, and set up a conversation in which you can learn what they are thinking. It’s the only way you’ll learn something new. If you’re not learning something new, you have nothing new to offer.
You can do this best one-on-one, but - as your skill grows - you can do it with a group as well. The trick is to stop offering your opinions and start requiring that they share theirs.
Here’s a simple way to do it:
Ask a question and then wait for your team member to answer. Take notes - just enough words, symbols, notes to remember what she said.
After a minute or two, play back what she said - not word for word, but enough so she’s clear you heard her.
Stay quiet and let her continue. Ask a question only if she doesn’t continue.
You’ll have your own ideas, suggestions, thoughts - write them down but don’t offer them. Just keep listening and learning.
Do this for at least 50% of the time you have set aside for the conversation, then take the rest of the time to make your contribution to her development, to help her determine her next actions.
This simple process will open the door to a significant amount of insight into your people. You’ll learn what they think, what they want, what they believe will help them be more successful.
Learn this information, and some very interesting things start happening:
People start to answer their own questions, solve their own problems, figure out their next steps.
They gradually become more direct and honest around you, giving you more valuable insight and information to do your job.
When you do finally provide your suggestions, your guidance, and your decisions, they will be more appropriate, more helpful, and will be regarded with more respect by the people to whom you have listened.
Stop Being ‘Understanding’
We coached Valerie for 18 months. She was CEO of her company, and, after a few weeks, it was obvious that she had a consistent complaint about Thomas, the finance manager, who was incredibly annoying and obstructionist. Valerie tried to be accommodating and understanding with Thomas; but, as he remained difficult and polarizing, Valerie simply ignored him and spent as little time around him as possible.
We had to facilitate sessions with the two of them to address the issues dividing them. Valerie told Thomas that he had to back up his resistance with facts and data or stop talking. It took a while, but Valerie developed the backbone to tell Thomas not to just criticize but to offer solutions. After this confrontation, it became painfully clear that Thomas just wasn’t capable of doing this, and within four months, he left the company.
Most of the managers we’ve worked with genuinely want to be effective and successful, but to do so in a way that is congenial. They know they don’t want to be bullies and tyrants like people they have worked with in the past.
But when their salespeople aren’t performing well and are filled with reasons why sales aren’t happening, many managers just swallow hard and hope for the best.
Sales managers experience all types of grinding heartache. They listen to the stories of what isn’t working, day in and day out, all in the name of being patient and understanding:
‘Sure deals’ in the pipeline keep slipping month after month.
Your best recruit is floundering and keeps coming up with reasons why people aren’t buying.
Another person is allowing himself to get sucked into doing service’s job instead of selling. He's completely convinced he can’t sell until the conditions are perfect.
Someone else shows up late to every meeting with yet another creative excuse.
Your latest hire keeps asking the same basic questions, over and over again, under the guise being new.
You tell yourself that you mustn’t show your impatience or irritation, and certainly not your anger. Your mantra is, ‘Be patient and they will change.’
But they rarely do.
Just being ‘understanding’ with people will not change them. In fact, it helps perpetuate the problems that exist in the first place. And paradoxically, you will increase the chance they will take advantage of you.
The problem here is that being understanding only works well with people who are already self-motivated, uber-responsible, and love to rise to a challenge. These people have an innate sense of ethics that keeps them on true north in their behavior toward customer, competitor, and colleague alike.
Not everybody is like that.
Furthermore, being understanding – over and over again – can weaken a manager’s capacity to confront reality when it is needed. It can create internal anxiety instead of resolve, and it causes the manager to indulge bad behavior in his people. It is similar to a parent who allows his underage child into the liquor cabinet in order to prove how cool he is.
And, to top it off, if you are the “understanding” manager you can turn into one of the people you’re managing! You start developing many excuses, stories, and explanations to give to your manager about why results are not happening.
The truth is that unless and until people are surprised by someone confronting their excuses, they can’t and won’t change. The pattern of non-performance will continue until someone has the authority to calmly say, “You have to change now, for your own sake and for the sake of the team.”
What we are not saying is that you need to become a heartless jerk. But when a person comes to you with their reasons and excuses, you must realize that these need to be confronted as they arise and not ignored. Because at the end of the year you’ll either have the results you were seeking or a whole raft of reasons why you don’t - but you won’t have both.
If you want results instead of reasons, it’s up to you to lead in a way that makes them happen. This requires being direct with the people whose behavior is blocking the progress you seek, and being direct in a way that leads them to change their behavior or get off your team.
Being direct requires being prepared. Empathy is important, but on its own it simply isn’t enough. You need data: data about their outputs and data about their inputs – their sales behaviors.
For each person on your team - including your high-performers – start by gathering the following information:
Their targets - exactly what are they aiming to produce?
Their outputs - their actual sales results, and their history over the past year.
Their inputs:
Focus first on their competence - identify the specific skills required to succeed and list examples that demonstrate what they do well and what they don’t.
Examine their execution practices - identify the ways they need to spend their time to succeed and list examples that demonstrate what is effective and what isn’t.
Perceive the attitudes that drive their behavior - identify the mindsets required for sales success and list examples that demonstrate the ability to motivate, discipline, and free themselves to succeed in sales.
Choose the three most important changes that you think they need to make in order to succeed and remain as a member of your team.
You will find that you have gaps in your knowledge. Good. Now you know what to ask them about when you sit down with them, one-on-one.