June 11, 2019 | Written by: Paul Peters
Categorized: Sales Performance Management
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In 1993, Alfie Kohn made a strong case that incentive plans cannot work. In 2012, as part of the Varicent Insight users conference, I had the pleasure of spending the day with Daniel Pink, our keynote that year who gave the example of a Fuller Brush salesman, and that commissions were a thing of the past, also captured in Harvard Business Review.
Both Pink and Kohn agree that the outcome of a commission-driven, variable based pay compensation plan, does not provide the results many organizations expect. Salespeople are not coin operated. If you put in X effort, it will not always multiply the results to offer you (Y). They agree that “pay” is not a motivator. “Rewards” can be transferred and interpreted into a punishment for those who don’t achieve them. You may be surprised to find me agree with them. They are right. But let me clarify where we part ways.
Exclusive focus on a pay as a motivation fails to include the holistic approach that organizations need to consider with a salesforce. More than money, the sense of winning is a motivation. Programs and processes start with pay because it is the foundation of measurements that are trackable. Commissions are based on dollars, percentages, and points. Pay based on dollars and percentages are ways to automate and track these metrics, but we do not show a maturing evolution of progress if we fail to consider points.
“What do you mean by points?” Points are those areas that are part of Peter Druker’s Manage by Objective (MBOs), or Key Performance Indicators (KPIs), or what some organizations define as a scorecard (often used as a Balanced Scorecard Methodology). When we look at the measure of a salesperson, it is quick and easy to consider a dollar or percentage as a success, but we fail to recognize the knowledge, experience, and relationships that actually help them to win. These metrics are considered over an extended period and reflect the real success of an individual or a team. It can also provide insight as to the seriousness of the longevity and churn that might be happening in the organization that drives costs up.
Organizations that are risk averse are keen to pick up on this line of thinking. If Pink and Kohn are correct, the outcome in this line of thinking will be contention amongst the salesforce as emotions are on the rise and territories become cut-throat. The heightened sense of disruption and winning on this team can lead to unwanted and illegal behaviors. This is why I agree with Pink and Kohn. We do not want a sales team from “Boiler Room” or “The Wolf of Wall Street,” as the consequences of FCC and other regulatory bodies closing the doors to business are not worth it.
Instead, a framework of awareness built into a sales performance management process supported by technology will support individuals and teams when succeeding and alert monitors flag when wrong or adverse practices are on the rise. These in conjunction with proper education, training, and recognized success in areas outside of dollars and percentages exclusively provide a healthy competitive environment. Today’s salesforce is more sophisticated than the Fuller Brush story Pink provided, but so is the market in which sales happen, with new and different channels. Salespeople can be an emotional group. They are often passionate to be persuasive. We want them to be, hell, need them to be. Just as the market has changed, so to have our views on the way to work with sales. We see a replacement of Maslow’s Hierarchy of Needs with Bartle’s Taxonomy of Player Types.
Based on game theory (video games, not cold war) Bartle sees four types of players:
Each has a unique style and way of communicating, more to the point each is motivated differently. Rankings motivate Killers, Achievers by tasks completed, Socializers by engagement, and Explorers find the edges of an undiscovered country. Alignment of these player types with sales performance means that we need to consider more than pay from dollars and percentages. Consideration of reward programs needs to encourage the naturally competitive nature in sales to win without chumming the waters for sharks. These “points” programs reward rankings in the team based on high scores in training and certification programs, completion of tasks that are positive activity based, socialize and nurture longtime relationships with clients, as well as explore new areas of untapped prospecting opportunities.
A holistic approach to sales performance includes the right measurements, to manage performance, and mature these processes for repeatable wins. More sales, at lower risk, through Sales Performance Management. It is a cognitive and thoughtful approach that I support through IBM Incentive Compensation Management. Let’s connect to talk more.