Monthly Archives: August 2010

How do you Create Performance Incentives? Four Approaches

Situation: The Company is considering options for both team and individual recognition. What have other companies found to be effective?

Advice from the CEOs:

  • One company has foremen compete on project quality, cost containment, and other measures. Bonuses are based on a mix of team performance, project difficulty and individual initiative.
  • One company uses year-end bonuses, but places more emphasis on frequent small recognitions: pedicure, manicure, going out for a meal on the company – things that let the employees know that they are appreciated on a regular basis. Any incentives paid are based on a mix of individual and team performance.
  • One company has completely eliminated bonuses. Salaries were raised to make up the difference, and individual incentives are created and paid during the year. Incentives reward specific accomplishments which are highlighted when the incentive is paid. Incentives are a mix of team and individual performance.
  • One company is very generous with bonuses – $5K to $10K at a time at the discretion of the CEO. These are paid face to face by the CEO and the individual is congratulated on their performance. However, the bonus recipient also signs a paper pledging not to talk about the bonus. If they tell others about their bonus, they are eliminated from the bonus pool. The company also uses publicly announced annual awards, performance-based monthly awards, shirts, etc. that are presented at company meetings. Interestingly, the smaller rewards and public recognition appear to have the most impact.

Key Words: Recognition, Bonus, Reward, Public Recognition, Effectiveness. Competition, Incentive 

How do You Pay Sales Reps? Two Examples

Situation: The Company is considering two options to pay sales people – base/draw plus commission, or no base/draw and larger commission. What do other CEOs find most successful?

Advice from the CEOs:

  • Align your sales incentive plans to your company objectives. Two examples, one of an aligned system and one of a dysfunctional system:
    • Aligned System
      • Sales reps are 100% commission (including expenses) with no caps on income. They are measured by two sets of metrics.
      • To keep their jobs, they have to achieve a minimum of 85% of their revenue goal. Fall below this and out the door.
      • However, commissions are calculated on the gross profit achieved on sales, and reps are provided with software to calculate GP and commission.
      • This company is the most successful in its market.
    • Dysfunctional System
      • Sales reps are paid a base plus quarterly commissions calculated on achievement of revenue goals.
      • The net result was that reps had no incentive to preserve gross margins.
      • The result was constant conflict between sales and finance; the situation only started to improve as reps’ commissions were converted to a combination of revenue and margin.
  • Issue: what is the role of the rep within the sale?
    • Is the rep a door opener or a closer?
    • What percentage of the close is attributable to the rep?
    • In a complex or staged sale, allocate commissions based on contribution to the close. Reps who can’t close are not as valuable as those who can.

Key Words: Sales, Commissions, Commission Plans, Objectives, Alignment 

Micromanage – Me? Four Observations

Situation: The CEO is concerned about the performance of both the company and individual employees. The employees are good, but there are many minor details of day-to-day operation that the CEO feels are important. How involved should the CEO be in the details of the business?

Advice from the CEOs:

  • The answer to this question depends on you.
    • What is your own priority on the use of you time?
    • How much do you want to be involved?
    • How confident are you in the people whom you’ve hired?
    • Are you comfortable delegating?
    • Do you want to stay small or scale and grow?
  • The good and bad of involving yourself in details:
    • The Good Side – communicates that you are willing to roll up your sleeves and do what it takes to get the job done.
    • The Bad Side – don’t do your employees’ jobs for them.
      • This is demotivating and communicates a lack of trust in their abilities.
      • If the workload is so demanding and the benefit so great, then secure additional resources to enable employees to get the job done themselves.
  • More broadly, remember the lesson from many business gurus – you increase the value of your company by getting the “U” out of your bUsiness. You may enjoy the detail of the business. However, do not let this interfere with your long term objective of having others doing the “doing” while you mature your role as manager and leader.

Key Words: Manage, Leadership, Delegation, Confidence, Growth 

We Only Want A-Players – But Do They Want Us? – Five Strategies

Situation: An early stage company will staff-up over the next year. In the past the CEO has recruited individuals with big company experience and solid resumes, only to find that they had difficulty transitioning to the hands-on responsibility of a small company. How do you find candidates who are highly experienced but who can also excel in a small company environment?

Advice from the CEOs:

  • The best candidates are not in the job-search pool. They are currently working but open to a change. Some will wish to return to a more hands-on situation.
  • Let people know that you are looking for “the best” and have a great opportunity. Create some buzz.
    • Go to your network ask “who do you know?” Don’t be shy!
  • Look for achievers – with proven performance in companies of the size that you plan to be in 12-18 months. Check their references carefully.
  • What can we do now, while we seek the right people?
    • Use contractors and consultants. These people are more entrepreneurial, self-starting, and self-accountable. Monitor their work. If they are good, add them to your team as permanent employees.
    • Develop a milestone-based personnel plan as part of your business plan:
      • When we hit Milestone A, we will need an operations manager.
      • When we hit Milestone B, we will need channel or market development expertise.
    • Conduct case studies of how other companies in your or similar spaces have facilitated their scale-ups. What worked? What didn’t? Why?

Key Words: Candidates, Recruiting, Fit, Culture, Start-up, Achievers, Performance 

Positive Marketing Messages vs. FUD (Fear, Uncertainty and Doubt) – Five Suggestions

Situation: IBM and others established the value of preaching FUD (Fear, Uncertainty and Doubt) within their marketing campaigns – “choose IBM, the brand that you can depend on, because who knows what others will actually deliver.” Is it still worthwhile to use FUD, or are we better off emphasizing the positive benefits of our services and keeping our image positive?

Advice from the CEOs:

  • When considering whether it is better to sell the time that your system or product is “up” or the time that it is “not down,” you need to understand your customer’s perspective.
    • If they are cautious and skeptical, then FUD may work. If they are positive and upbeat, then they will more likely respond to a positive, upbeat message.
    • Match your marketing message to the attitude of the key decision makers within your customer companies. Learn their hot buttons during ambassadorial visits.
  • Companies sometimes use FUD when they sell “the future.”
    • Being “in”: if you haven’t got our product/service you won’t be with it!
    • Insurance companies sell protection from the unknown.
  • Mix the message. Sell the positives, with an appreciation of the cost of the negatives to reinforce the positives.
  • Be the “Mr. Goodwrench” of your marketplace. Educate and reinforce.
  • Consider positive health care analogies in your marketing:
    • Rapid Response – mimic messages from urgent care.
    • The value of maintenance programs – mimic messages from wellness programs.
    • Develop metrics to substantiate what your customers are hearing from your message.

Key Words: Marketing, Messaging, Brand, Image, Research, Validation