Sales & Marketing Management - March/April 2008 - (Page 18)

MANAGEMENT STRATEGY 4. Comp plans that are too complicated. Remember the old adage: “Salespeople will do what you pay them to do, not what you tell them to do.” Comp plans need to be written clearly with the business goals clearly stated and understood by the salesperson. “Tell them what you’ll pay them to do,” Stein says. “Don’t clutter the horizon with weekly spiffs or contests. There will be resistance if they don’t understand what they’re supposed to be doing.” Steve Grossman, leader of the sales effectiveness business in the Americas for Mercer, agrees that trying to make a comp plan perfect is unattainable. “You have to have the flexibility to accommodate differences in the product mix. But don’t try Band-Aid fixes to accommodate salespeople and the bean counters.” Just ask Carl Peterson, the former vice president for North American retail sales and marketing for a major manufacturer of waterrelated pumps and filtration. Peterson was confronted with the problem of customer consolidation, a human resource-driven compensation plan and no easy way to reward superstar salespeople without skirting the HR-driven compensation parameters. “It’s an industry-wide issue,” he says. “How do you take care of your superstars and stay within legal, ethical and non-discriminatory practices?” At the time, Peterson oversaw six national sales directors, 15 regional sales managers and 150 sales reps generating $260 million in revenue. His division also had 75% market share. Ultimately for Peterson, the compensation solution was a “team approach.” Because “big box” stores like Home Depot and Lowe’s had decimated secondary accounts, the focus of Peterson’s sales force was narrowed to a few major retailers. The challenge was to provide enough incentive to the salespeople from this reduced pool of possible business. “What if there were floods in the Western sales region and nowhere else?” he says. “Those reps would sell more water pumps that quarter to customers than would reps in the East.” His company’s compensation plan was multi-pronged: “A certain percentage was paid on sales, a certain percentage on group net operating profit, a certain percentage on a three-division profit goal, and a certain percentage on discretionary goals that I had for the salesperson.” What Peterson did, with the blessing of the human resources department, was increase the discretionary percentage of his superstars’ compensation plans, thereby giving him latitude to reward exceptional performance. “I was able to keep my star performers happy while 18 SALES &MARKETING MANAGEMENT MARCH/APRIL 2008 staying within the company’s non-discriminatory parameters,” Peterson explains. “I had to make my case to the human resources people, and they were onboard with what I wanted to do.” He adds that emphasizing the discretionary portion of a comp package can give a manager more leeway if the company’s salary structure is graded with minimum, mid and maximum levels. 5. Capping earnings potential. Back in 1962, H. Ross Perot was selling computers for IBM. He reached his yearly quota the first three weeks of January. Perot then asked management what was next, only to be told he wouldn’t be earning any more commission since he hit his quota. Perot quit and started Electronic Data Systems. The rest, as they say, is history. With all of the effort put into finding and grooming top sales talent, why risk driving those folks away through easily avoided compensation pitfalls? Stein relates the story of a senior manager who turned his back on $250,000 in stock options for staying with a company until those options matured. Why? Because, after over-delivering in every quarter and over-achieving in every metric, his CEO told him that if total company revenue didn’t increase by 50%, he wouldn’t receive his bonus. “An impossible goal totally demoralizes an employee,” Stein says. “It’s the quickest way to lose good people.” 6. The past doesn’t equal the future. Stein says comp plans should be re-evaluated at least yearly. “In general, every salesperson with substantially the same job should have the same comp plan,” he says. “However, in the real world, that doesn’t always happen.” Salespeople talk; word will get out if one is making more than another with seemingly the same experience. One of his clients saw the majority of their business come in the month of December. The CEO could tell his normally hard-working sales force was exhausted from ruthless competition and demoralized because they knew there was no way to make their numbers with the comp plan that was currently in place. Stein suggested to the CEO that he adjust the quotas down, but still make them a stretch. The CEO agreed, and sweetened the pot by offering a $3,000 bonus to any rep who reached quota. www.salesandmarketing.com www.salesandmarketingmanagement.com http://www.salesandmarketingmanagement.com http://www.salesandmarketing.com

Table of Contents Feed for the Digital Edition of Sales & Marketing Management - March/April 2008

Sales & Marketing Management - March/April 2008 Contents Editor's Letter Brian Tracy University Sales Marketing Management Cover Story: Lessons From the Master Maximum Mobility Training Technology Incentives/Motivation Travel/Meetings Book Excerpt - Value Merchants The Way I See It - End the Discounting Habit

Sales & Marketing Management - March/April 2008

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