Tag Archives: Incentive

How Do You Get Doer/Sellers to Sell? Four Recommendations

Situation: A company has a geographical sales and service organization. Much of the sales effort comes from the consulting reputation of the managing director of each geographical unit, but he directors’ core values usually favor consulting over meeting sales plans. How do we get these directors to meet sales goals? How do you get doer/sellers to sell?

Advice from the CEOs:

  • One company shared their experience turning around a consulting organization with no sales culture. This was a 5-year process. It started with a leader who sells successfully and teaches by example. As the company made the transition, they selected new hires for sales skills to complement their consulting skills. This facilitated their transition to a strong sales culture.
  • Another CEO pointed out that you need to commit to build a sales culture. Moving to an account manager team versus an engineering/professional team is a big shift. It took time and patience. Hire effective sales people to jump-start the process. Most of the successful seller/doers will be new hires. Revise the reward and recognition structure around the new sales objectives. Make rainmakers the best paid people. This will bring others out of the woodwork.
  • A third CEO recommended biasing sales compensation for doer/sellers toward variable compensation. Allow successful individuals to make over $200K per year. Consider a 3-year phase-in by not increasing base pay through raises. More than make up the difference in available variable pay. This will give directors more incentive to hit their sales numbers
  • This is a difficult change in both sales leadership and culture. It may require significant changes in leadership within the company.

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What are Effective Performance Incentives? Four Examples

Situation: The CEO of a company is considering options for both team and individual recognition. What have other companies found to be effective? What are effective performance incentives?

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.
  • Another company uses year-end bonuses, but places more emphasis on frequent small recognitions such as a pedicure, manicure, and going out for a meal on the company. These are rewards and recognition 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.
  • A third company 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.
  • A fourth 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. This 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.

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How Do You Pay Sales Reps? Two Options

Situation: A CEO 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? How to you pay sales reps?

Advice from the CEOs:

  • Align the sales incentive plans to company objectives. Two examples were offered, one of an aligned system and one of a dysfunctional system:
  • The aligned system. Sales reps are 100% commission (plus 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 the rep is 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.
  • The 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.
  • The Key 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.

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How Do You Follow-up Great Media Coverage? Five Points

Situation: The CEO of a company just issued a press release that generated great media coverage. The result has been increased call traffic and “hits” to their web site. How can the company leverage this response into increased sales? How do you follow-up great media coverage?

Advice from the CEOs:

  • Everything starts with a Marketing Plan. Without a plan, there is little to guide next steps. The most important benefit is that the company has established a presence in the market that will make it easier to gain coverage from future press releases.
  • What can be done short-term? Use reverse Domain Name Search to look up the email addresses of those who recently viewed your site. These will enable you to follow-up email materials to capitalize on interest once the marketing department has a plan.
  • Develop a holistic marketing plan, including incentives for prospective customers to respond to your product or service offering. Once the marketing plan is in place, send out a series of timed press releases to develop and maintain interest in the company’s technology.
  • Feature the company’s offering and incentives both on the company web site and in non-web collateral for prospects and leads. When interested customers respond by visiting the web site or calling, use the incentives to convert this interest into sales
  • Put different response codes on web, snail mail and other collateral so that he marketing department can track the source of leads. This will indicate which channels generate the most and highest quality leads. This knowledge will improve future planning, budgeting and allocation of resources.

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How Do You Incentivize Salespeople to Sell? Five Points

Situation: Many companies have challenges creating effective incentives for sales people to sell. The CEO of one company asked others around the table what their experience has been creating effective incentives to maximize the efforts of their salespeople. How do you incentivize salespeople to sell?
Advice from the CEOs:
• The three fundamental sales compensation strategies are commission only, salary only, and base salary plus commission. The group discussed the advantages and disadvantages of each approach.
• Commission only. This system is good in the sense that it incentivizes the salesperson to earn as much as possible. Some highly successful sales organizations give new salespeople a “runway” of, for example, a year with a modest salary to establish themselves. Once they have reached the end of the runway, provided that they have proven that they can sell, they shift to commission only. Once on commission they must sell to eat. The down sides are that a high percentage of “rookie” sales reps many do not succeed, and even successful reps may not to be dedicated to the company. Both latter groups may be on the lookout for a more suitable option for themselves or a better deal.
• Salary Only. Unlike commission-based sales, this option may not provide much incentive to excel. It may foster complacency.
• Base salary plus commission. Generally, this system is the one favored by many companies. It gives the salesperson some degree of stability while they are developing their accounts yet motivates them to “break the bank.”
• The best sales systems allow and encourage their salespeople to make a lot of money. In some of these companies salespeople are among the most highly paid people in the company. This boosts both retention and success.

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How Do You Build a New Channel? Four Cases

Situation: A company wants to increase business by building a new channel. The new business is different from the company’s base business, but won’t change the company’s focus on its base business. What lessons have been learned by other CEOs who have accomplished this? How do you build a new channel?

Advice from the CEOs:

  • One company created a new channel without changing the base business.
    • They responded slowly to the opportunity before deciding to change.
    • They needed to change infrastructure by adding more people.
    • They also needed to redefine the offering to meet the needs of new clients.
    • This involved adding additional data which had been accessible previously but hadn’t been presented.
    • At first the hand off wasn’t smooth. Hiccups that could have been foreseen with more planning were extra data fields and rough hand-offs. Future new releases will focus on improved process review and more challenging of assumptions, and more patience in the scoping stage.
  • The second company created a new branch with different products and operations, but maintained one financial and inventory management system.
    • The initial produce was sold and installed, utilizing union labor. The new product is sold wholesale business to businesses and is non-union.
    • After struggling with attempts to house both operations under one roof the new operation was moved to a separate location.
    • This enabled company to set up separate operations and to fully understand the financials of both operations. It also makes it easier to assess the viability of each business and to implement changes in one without disrupting the other.
  • The third company created a new offering to sell to the same customer base, with no change in the back-end systems.
    • The new business created an insurance model for the company’s services as an alternative to the original break-fix model.
    • The two systems use a common sales team, network engineers, and back-end system. Customers choose either insurance or break-fix.
    • The challenge was that the two models need completely different monitoring and incentive systems for the engineers. This took time for development and training.
  • The fourth company created two production operations: turnkey and component.
    • This called for different sales and contracting processes and separate production areas on the plant floor, with clear delineation but using the same back end, financial, and engineering support systems.
    • The component process is short-run, high value, high margin; the turnkey is high volume runs, lower value, low margin.
    • The challenge has been in setting up a new set of contract agreements and monitoring systems to monitor the financial success of the turnkey operation.
  • What is the common thread?
    • Put sufficient time into planning and evaluating options and challenges so that there is a solid understanding of the new channel before starting.

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How Do You Add a New Capability? Four Approaches

Situation: A CEO reports that customers frequently ask whether the company can deliver a service that isn’t current in their portfolio of capabilities. In a substantial number of cases, the ability to offer this service is a key factor in their choice of vendors. The company’s experience with outside consultants offering this capacity has been disappointing. How do you add a new capability?

Advice from the CEOs:

  • Reevaluate the company’s needs and assess whether these can be better meet by bringing this capability in-house, or by restructuring how the company works with contractors. Determine whether the latter is just a negotiation and contract / payment problem.
  • Take a closer look at how the company contracts and creates incentives for outside contractors. Do they have performance objectives written into their contracts that reward them for meeting contract commitments? Can they earn bonuses for beating contract deadlines or exceeding design requirements? Are there penalties them for missing key deadlines?
    • Is it clear whether contractors are missing deadlines because of the “creative process,” because they don’t use their time efficiently, or because they have other commitments that take precedence at the company’s expense?
    • If the answer is either of the two latter situations, then contract adjustments may work. Similarly, if they have an incentive to be more creative faster to meet a bonus deadline a contract adjustment could also work to the company’s benefit.
    • Another option in working with independents is to make it clear that the company is generous, but if the contractor does not meet deadlines, they go to the bottom of the list for future opportunities.
  • An option is to hire one specialist and challenge them to grow a practice within the company. This may mean that they have to do all tasks early on, but the potential win will be the opportunity to grow a significant business and hire a team to do the lower-level work under their direction.
  • Another option – bring on a creative problem solver with appropriate experience who can support the existing team, but who will have more flexibility than a pure specialist.

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How Do You Build and Develop the Right Team? Four Points

Situation: A CEO has two issues. One concerns her COO about whom she is receiving complaints from staff as new processes are implemented, and the other is beefing up the sales team. On the latter issue she is concerned about both her ability to pay the high-level seller-doers that are needed to support growth and potential turnover. How do you build and develop the right team?

Advice from the CEOs:

  • The COO has already put the right process in place. Coach this individual to lighten up and allow everyone to adapt to the new regime.
    • As new processes are implemented coach him not to implement them rigidly at first. Allow people time to get used to the new process. Allow some flexibility in implementation so that the new processes can be adapted to the individual styles of the key players.
    • Over time tighten expectations gradually until each process is fully in place and running smoothly.
  • Have the COO communicate to the company that it’s growing, the focus is now on hiring, and the task facing the company is revenue growth.
  • For new salespeople, the investment cycle can be 6 months to full function.
    • In the mix of salary and bonus, weigh the bonus side heavily – the side that won’t become payable until the new individual produces.
    • This becomes an incentive for new salespeople to get up to speed quickly. It also helps to weed out those whose talents aren’t as sharp as they represented in the hiring process.
  • The salespeople are the key marketers for this company as well as the rainmakers and producers. It may be necessary to commit to this investment to ensure future growth and adjust the company’s annual earnings forecasts accordingly.

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How Do You Create a Good Lead Generation Campaign? Five Thoughts

Situation: A CEO wants to increase the company’s customer base. What have others done to generate leads in order to expand their customer base. What techniques have worked best? How do you create an effective lead generation campaign?

Advice from the CEOs:

  • One CEO who targets large customers used outside telesales at first but found them to be ineffective. They have since gone to an inside team. There is a learning phase, but with experience this can be an effective solution.
  • Another company uses an inside telesales team. This started with one individual and has become a team. Because this provides more control, one can hire for quality. This is often older callers who sound very professional on the telephone. It also provides the opportunity to tweak the telephone script for special promotions or circumstances.
    • For this company the number of calls per lead and closed account are high – up to 5% for leads and 1% for closed accounts. With a disciplined team and proper incentives, this is very doable.
  • Investigate the availability of local business lists such as Craig’s List or Rich’s Business Lists These lists are searchable by industry and business parameters.
  • Consider small professional conferences that attract target personnel of your key potential prospects. These are great networking and lead generation opportunities.
  • Make sure that there is a good link between the telemarketing and sales teams. This includes tracking, credit and rewards for landing accounts, and similar incentives.

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How Do You Build Teamwork Across Account Teams? Four Observations

Situation: A CEO is concerned that there is a lack of teamwork across the company’s account teams. Often, they compete with each other rather than sharing knowledge and information. While some competition is good, too much can stifle growth. How do you build teamwork across account teams?

Advice from the CEOs:

  • It looks like the company needs to change its account management culture. There is a need to review the entire operation and rethink how the account teams interact with each other.
    • Schedule meetings with the full account staff – attendance required – describe the concern and encourage teams to share ideas and resources.
    • The commission structure drives performance. Tie financial incentives to collaboration. Reward the teams on collaborative efforts disproportionately to individual team effort – Y% commission for individual team effort vs. 1.5 x Y% commission for collaborative effort.
    • Increase monitoring of revenue and client acquisition – for the full group as opposed to individual account teams.
  • To keep a manageable level of competition among teams, group them into “leagues.” The leagues compete against each other for production and financial rewards. Encourage them to develop social interaction to build the league spirit.
    • A twist on this is temporary “leagues.” Shift team and league groupings from time to time to share best practices and resources. Measure the results. Track and reward the best league performance over time.
    • Be sensitive to the possibility that individuals may respond differently to league vs. individual team incentives. Those who respond more positively to the league concept can become the collectors and disseminators of best practices among the teams. This creates a status incentive to complement the financial incentives.
  • Consider the peer-programming model from the software industry. In this model, two people are occasionally teamed with one as lead and one as back-up. Let them learn from each other for a period and then return to normal operation. The same can be done with teams.
  • Does the company really have a problem? If the corporate competition leaves at 5:00PM but the company’s staff are working weekends to produce, maybe things are OK!

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