The cardinal rule of incentive psychology: reward for desired behavior. "Why should I?" is the operant question looming in the minds of any professional with a compensation plan that can reward beyond merely a weekly salary.
Recently, a multi-billion dollar distributor of office products and services in the Midwest hired me to uncover why their sales team wasn't growing its territories at a much stronger pace. In the discovery phase of my consulting with the VP of the region and his field sales managers, two critical issues surfaced.
One, the incentive plan in place was not compelling enough to entice the sales team make the hard charge to pursue new business. Secondly, new sales hires were not provided with clear and measurable objectives for the first 12 months, both to hold them accountable and allow management to measure and course-correct to insure success.
The latter issue was a costly error that caused additional problems: When the salespeople who weren't performing as well were reviewed and criticized for lack of sales, the new hires were surprised and felt mislead. Ultimately, high turnover resulted. "I didn't sign on for this kind of surprise accountability," was the answer. Fortunately, both problems were fixable very quickly.
This story is typical of many big and small companies when trying to create incentive programs to motivate existing salespeople. All too often the incentive program comes across like a bribe or a trick to get the sales team to sell more. But it doesn't work because management doesn't explain all the true benefits for the salesperson in a compelling way.
Here are some definite components your incentives plan needs to contain to be successful when selling in a recession:
First, management must start at the beginning of the hiring process to define how the incentive plan will help the sales person excel. Set standards at the beginning of the interview process.
Second, new hires must agree and participate in the formulation process of what the key initiatives will be, how they'll be measured and compensated, and what the consequences are for failure to achieve the initiatives.
Third, incentives must be lucrative enough to reward for the behaviors you desire out of the sales team. Example: if you want bigger dollar orders, or for the team to sell a certain product or service, then set a higher commission payout for the product you want to sell and a lesser commission for the rest. You can also set a minimum sales order to eliminate small orders that are a pain to process, don't lead to big orders, and are too easy to sell. Chances are the commission rate is the same for these small orders, thus the weak sales people go after low-hanging fruit and don't pursue bigger ticket sales.
Fourth, sales managers must make it a priority to check, measure, and evaluate this initiatives process from day one. If they don't check, hold accountable, and course-correct the sales professional, it's unfair to penalize the salesperson. It's also the sales manager's main role to mentor and ensure the team learns and sells.
Fifth, sales professionals are not always motivated by money. The office products company I discussed found this out when they put cash incentives into place for 90 days if a salesperson set face-to-face meetings with key decision makers, taking their sales manager to see a client, or for writing X number of proposals over their average. The results of the experiment showed only a moderate increase in sales. The experiment did confirm the company was using the wrong measurement criteria in hiring new salespeople. So, they revamped the criteria to fit their overall incentive program. This also reduced turnover in the sales force as the new hires better understood and took ownership of their expectations.
Sixth, measure and rank the performance of your sales team right now. Consider removing the bottom 20 percent performers. This accomplishes a few valuable things:
• It frees up more cash to pay better commissions or bonuses to your top 20 percent of the sales team.
• It frees up cash to invest in updated sales training for your team to ensure they have the sharpest skills on the planet to sell right now.
• It sends a message to the sales force you're serious about competing in this economy.
• It tells your sales team you recognize when people are not doing their jobs, and you'll be respected more as a result.
• It reduces costs of salaries and benefits.
Seventh, ride the trend and create a stimulus package sales contest right now. Promise an HD TV to every person who sells X over their quota this quarter or this month, or if they sell any order over a certain dollar volume. Salespeople love winning in public, and there's no better trophy than a 42-inch huge TV sticking out the trunk when they pull into their driveway in front of family and neighbors.
Eighth, "Hunkering Down" is not a management strategy, tactic or option. If you're climbing Everest and a surprise blizzard appears, hunker down. If your boat turns over in the ocean, hunker down. If you're in a foxhole with a jammed gun and help is on the way, hunker down. If you have used this phrase as a business leader, wash your mouth out with soap and never say it again. It shows lack of a plan, demonstrates fear, and it tells your sales team you are not prepared to lead them out of this tough spot.
Managing a sales team in a recession is hard work. It's challenging and emotionally draining. It's also not a popularity contest—weak performers need to be terminated, and top producers need to be compensated and nurtured to retain. So right now, write down the top six items you need to address with your sales team to ensure they continue to sell, stay motivated, and are prepared to deal with the uncertainty and emotionally charged clients in the marketplace during this recession.
Give each salesperson specific actions to take you can measure; they will appreciate any help you provide. Remember, like anyone in a commission-driven job right now, they're uncertain and want to stay employed.
Russell Riendeau, Ph.D., is a behavioral scientist, senior partner of The East Wing Search Group, and co-author of "The CEO's Guide To Talent Acquisition: Finding Talent Your Competitors Overlook." E-mail him at email@example.com.