My friend Joe Pych of Bionic Ad Systems sent me this thoughtful, evocative Harvard Business Review article on sales compensation, and I think it’s a must-read for anyone running a business who needs great sales people doing great work for you. (OK, so that’s pretty much everyone.)
What I love most about Doug Chung’s take on “How to Really Motivate Salespeople” is contained right in the title: it’s a truly curious take on motivation. I don’t consult directly on compensation with my clients, but I end up in a dozen conversations a month about motivation and all the ways current compensation plans aren’t achieving it. So to my ear, Chung’s ‘advice’ at the end of the article is sweet music.
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- Don’t set caps on what truly high-performing sellers can make – or if you must set them for political reasons, set them as high as possible.
- Keep it simple – you can have multiple motivating triggers within a plan while also still keeping it easy and logical. Take the plan away from your CFO and have a liberal arts major read it.
- Stop all the knee-jerk resetting of quotas – just because someone crushed it and got a big paycheck doesn’t mean their quota was set too low.
One other bit of wisdom that comes out in the article centers on the competitive nature of the seller: “Sales reps work harder for the chance to earn a reward than they do after receiving one.” The sellers who I’ve met – the ones worth keeping and investing in, at least – genuinely want to perform well in the eyes of their managers and their peers. So if you accept this premise, better to look for what might disincent them from pursing that level of performance. Here’s my take:
- Too many reps go well into the first quarter – or even the second quarter – without clarity around the comp plan. My guess is that this happens because the company wanted to work out all of its other priorities first and compensation was a trailing issue. Not good.
- Compensation ends up completely divorced from the behaviors that ladder up to performance. Good comp plans reward the outcome, but they also focus on engineering and reinforcing positive “interim outcomes.” Understand what will get you there, define it, measure it, then reward it.
- In life, in business, in sales, and in designing your comp plan, complexity is the enemy. If you couldn’t explain it in a few sentences at the local Chamber of Commerce Meeting, it’s probably going to quickly feel irrelevant to your team.
What’s the answer? Chung has some good ones. But I’d rather focus for now on the right question: Why? Ask why your sellers make the decisions they do and why they might become disaffected or unmotivated. Now you’re dealing in motivation: now your path becomes clearer.