We do it all year. While everyone is fast asleep, we drag ourselves out of bed, knot our ties, and exercise our smiles. We plow through ice storms for morning presentations in Omaha. And we spend our days driving and calling, incessantly checking our BlackBerries while we wait in yet another lobby for our next meeting.
For most, it takes years to understand what makes people tick. We usually get 15 minutes (at best). But we take what we can get. We build those relationships, brick by 15-minute brick. Then we crunch numbers and submit paperwork at night. And fall asleep on a strange bed. And wonder why we do what we do.
Then, we wake up and do it all over again.
No, the desk jockeys wouldn't understand us. They even naively say we're in the business of making friends, not sales. But how often do their "friends" reject or renege on them? No, there's a reason why salespeople earn more: We stomach the disrespect and shoulder the blame. We miss our children's baseball games and drop our plans at a moment's notice. Sure, the higher-ups ply us with liquor and lobster at the annual meeting, but we know how fragile it all is.
Every year, we live off a number. Hit it and you walk across the stage to applause. Miss it and you're a leper under relentless scrutiny. When money is involved, it's always personal. In sales, money is more than a livelihood; it's validation that a year of sacrifices had purpose. And it's that number—how it's derived and delivered—that makes the difference between goodwill and bad blood, focus and distraction, hitting goal and falling short.
As management, the responsibility of crafting a bonus plan that motivates—rather than alienates—us falls to you. Here are 10 tips to help guide you through the process:
1. Involve them early. Salespeople evaluate a plan using two criteria: "Is it fair?" and "Will I make money?" If your structure falls short by either standard, you're set for a year of disenchantment and defections.
Head off those sentiments early. Make your team's input part of the process. Ask them for a number they feel is fair (and why), knowing they'll naturally underestimate. Run potential measurements past them so they can pick apart the inconsistencies before a plan is finalized.
Sure, the higher-ups will calculate a number regardless. Your team understands. But the traditional top-down model doesn't cut it with the talent anymore. Take your team's pulse to learn what they feel is attainable and equitable. Then, champion the best ideas up the chain.
2. Reflect the right priorities. Sometimes, it's the path, not the destination, that determines long-term success. Sure, hitting your number is important. But what if that success is built on closing the wrong business or valuing counterproductive behaviors?
Look at where you are and where you want to go. Ask yourself, should be you weighing certain product lines more than others due to their future residuals? Should you be de-emphasizing others due to their longer cycles, increased effort, or lower returns? Do the strategies needed to close certain business align with our corporate values or long-term interests?
For example, you can build your book by stressing new acquisitions in bonus plans. But this may drive your team to neglect existing accounts, producing an inadvertent and offsetting churn.
Similarly, realize your sales team is under intense pressure to meet goal; their jobs are literally on the line every year. Everyone wants to make an honest living, but there's always that temptation to take shortcuts and do bad deals. Take pains to ensure the right business, with the right margins, is built into your plan.
3. Deliver it on time. "We're working on it." "It's coming." Your people have heard those tired old lines for months. And yet, they still only have a vague idea of where to focus, how much they need to sell, and how they're being measured. Don't wait until third quarter to deliver your plan. Your team deals with enough unknowns and surprises in the field. Delays only fuel their worst fears (and doubts about leadership).
4. Consistency. You may have different teams covering separate lines. Look at their plans: Do they measure teams against the same general standards?
For example, pretend you sell books, with one team targeting educators and the other focusing on retailers. Wouldn't it be unfair to penalize one group for returns and not the other? And wouldn't such a discrepancy skew any apples-to-apples comparison between them?
Bottom line: Your message needs to be the same across all segments. What's more, stay current with how competitors bonus their reps. Chances are, your people have compared notes with them already. Don't allow your bonus plan to become a competitive disadvantage.
5. Provide transparency. Salespeople are natural rebels who don't give up just because someone says no. Should you be surprised when they show that same tenacity with you?
Reps expect rationales grounded in facts and business realities. "That's just how it is," doesn't cut it when their livelihoods are at stake. Instead, they want to be certain they aren't being set up for failure with an arbitrary number.
So have your reasoning ready. Is your number supported by history and existing pipelines? Will there be launches to jump sales? Are there new revenue sources to tap, such as expanded government funding or new markets?
Similarly, have an unambiguous system to track sales. Your reps should know exactly what they've sold and where they stand at that moment. There is no room for subjectivity.
6. Keep revisions to a minimum. It's a story as old as commerce: the higher-ups over-promise or make mistakes, and the sales team pays for it. Yes, your people have all read that clause in their plans, giving their superiors the right to revise the terms. And they understand how markets and finances can quickly change.
But be careful about altering the rules in the middle of the game. Salespeople keep score. If you're going to take something away, find something to give back. Otherwise, it's just another distraction that keeps them from selling.
7. Make it simple. We've all heard the idiom, "Read the fine print." It's prudent advice…except when you're drawing up a bonus plan. No, reps deal with complexities and vagueness every day in the field. On internal matters, they want everything succinct and obvious.
There's nothing more maddening than losing bonus money on a technicality. Keep the segmentations to a minimum if you want to keep focus and production at a maximum.
8. Honor your word. You really don't know someone's character until money is involved, and a bonus plan is only as good as the character of those who administer it.
In sales, your reps often feel like the world is against them. They can't be looking over their shoulders, wondering if their leaders will pull the rug from under them.
Sure, the higher-ups occasionally calculate that reps don't have the stomach for lawsuits, or battles with human resources or unemployment (in this economy, at least). But what's gained in dollars is lost in credibility. In business, you can't respect anyone you don't trust. And without trust, you have nothing.
The treatment of the sales team is the barometer. Your reps know that if their leaders cheat them, they won't hesitate to do the same to customers. It's a slippery slope you don't ever want to reach.
9. Hear them out. At end of year, everyone is clawing for scraps to put them over. And they'll come to you to re-open long-simmering arguments. Your first instinct may be to dismiss these petitions. Don't. Chances are, there were issues—such as delivery delays or revenue-reducing promotions—that were beyond their control.
Give them a forum to make a case, so they feel their concerns were given a fair hearing. Be willing to make some concessions, too. You want your team feeling enthused going into the next year. You don't want them devoting precious energy questioning, grumbling, and sending out resumes.
10. Give everyone a win. You'll always have 25 percent or more reps who won't pull quota. The question is, how close will these reps come?
Once fourth quarter hits, you'll have reps who lose heart or interest. They'll be tempted to squirrel away sales until first quarter to jumpstart the next year. In some cases, you'll have new reps who haven't been around long enough to qualify for bonus. And you'll have others who fell behind picking up the slack for turnover or extended absences.
So how do you goose performance from reps who are out of the running? Consider implementing a team bonus to apply peer pressure on everyone. Similarly, run short-term contests or include non-sales goals, such as moving prospects up to a certain level in the pipeline.
Either way, focus on giving them a taste of money, to rev them up for the next selling season.
SMM columnist Jeff Schmitt works in publishing in Dubuque, IA. He can be contacted at firstname.lastname@example.org, and you can follow him on Twitter at jefflschmitt.