Sales commissions are supposed to encourage the performance of your salespeople. But do they work? Are they actually effective in driving increased revenue?
As an incentive to drive greater performance, sales managers will continue to debate this question. You will have to determine whether or not commissions will work in your industry with your product/service. But here are some factors to consider as you set up your compensation system.
Overall – the simpler the better. If the system you devise is too complex, you invite many problems.
- Overhead. Tracking and rewarding according to multiple variables is just asking for high maintenance, confusion and misappropriation which creates mistrust, unhappiness and divisiveness on your team. With too complicated a system, you will find yourself as sales manager spending an inordinate amount of time resolving disputes and worrying about how to distribute leads. Every salesperson on your team has a good sense of what lead will result in business and, therefore, commission. Think about the grumbling that will ensue if leads are not perceived as evenly distributed.
- Fairness. Most often territories or sales responsibilities overlap; how are you going to assign the commission fairly? Will it be shared among team members or across boundary lines? And what about the engineer who spent so many hours on site with the customer and was critical to the final sale?
- Assimilation. If current team members have difficulty understanding the nuances of the commission assignments, how are you going to explain the system to your new hires? This is a time when you want their enthusiasm, not their bewilderment and resistance.
- Encouraging Change. Perhaps you have been given the task by the CEO of changing to a different product mix. The CEO is convinced that this will help the company in the long-term but, in the short-term, you know that sales will decrease and your sales team will suffer lower-than-expected commissions. They will not be happy campers.
Can you eliminate commissions altogether? Some companies have done so and are happy with the results.
Salespeople, as do all other employees, have a base salary. Over and above the base, employees are compensated as the company thrives and they share in corporate profits.
You can still reward top performers as incentives but the system is simple, straightforward and transparent. No more late nights sorting out commission inadequacies.
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Today’s corporations have heeded the message of decades ago from organizational experts that no company should exist without the following long-term guidelines:
- Vision: picture of what the organization hopes to become
- Mission: the fundamental purpose of why your company exists and for whom
- Plan and goals: how specifically you are going to achieve your goals and measure progress
This is well and good. But beware of looking too far ahead and not focusing on the near-term execution. If you are not successful here and now, there will be no need for a future vision.
Here is how you can achieve the ideal balance between long- and short-term. Be sure you have clear-cut answers to the following questions as a leader:
- Positioning: Are you in the right business (es)?
- Target Market: Can you clearly identify your ideal customer/market?
- Differentiation: Are you adding enough value so that you have a competitive edge in your target markets?
- Branding and Marketing: Do your target customers know about and appreciate the value you add?
- Sales, Service and Delivery: Do you have all the resources you need to deliver on your value proposition?
As a leader, you have done your homework, communicated the long-term strategy to your employees, and gained their buy-in. They can articulate the vision and mission clearly. But if you have taken your eyes off the road ahead to focus only on the far horizon, you risk getting side-tracked or never reaching your destination. In other words, you have plugged your final goal into MapQuest but have ignored the step-by-step directions to get there.
It is the road map after all that should guide all your decisions along the route.
For example, here are vision and purpose statements from the Kellogg Company:
Our Vision: To enrich and delight the world through foods and brands that matter.
Our Purpose: Nourishing families so they can flourish and thrive.
In general, these are laudable goals. But they are so comprehensive and overarching that they do not direct the day-to-day operations where the rubber meets the road. Kellogg must ask the five questions above for each of their businesses and then use the answers to determine how to execute on their plan.
It is a question of translating the ideal vision into smaller goals that allow for flexibility as the situation changes. Play by play, your team needs to advance toward the goal and shift according to what is happening on the field.
No one wants to feel interrogated.
Good, well-crafted questions result in thoughtful, complete answers. Some people seem to come by this art of communication naturally. But the fact is that, with a few tips and some practice, we can all be better questioners. And in a sales role, there may be no more important skill than uncovering a customer’s goals, pain points, motivations, interests, and desires.
Here are four proven consultative selling questioning techniques to follow to improve your art of questioning.
- Ask the question and then stop. Nervous questioners tend to ask multiple questions or to fill a conversational void by talking themselves. This not only demonstrates your unease but it also defeats the purpose. Plan your question and then ask it. Allow for some silence while your customer considers their answer. Unless you are looking for a simple “yes” or “no” answer, ask an open-ended question that will give you much richer information about the customer’s situation. Open-ended questions often begin with “who,” “what,” “where,” “when,” or “how.” For example, rather than ask, “Would you like to solve Problem X,” try “If you were able to solve Problem X, how would that help you?”
- Clarify if needed. It is OK to interrupt with another question either to clarify an answer or to keep the conversation on course. Though it may at first seem impolite, most customers will understand as long as they continue to have the floor. The alternative is to appear to follow the answer when you are actually confused. This could jeopardize the whole flow of the questioning and show that you were not really listening.
- Don’t ask if you already know the answer. Leading questions are unprofessional…don’t ask them. In fact, why would you ask the question if you already know the answer? Find another way to probe for our customer’s thoughts on a situation. For instance, if you already know that they resent the last-minute price hike in your recent negotiations, ask not “so what did you think of the price increase” but “how might we have introduced the need for a price increase without causing surprise and upset.”
- Be genuine. If you pretend you know more than you do, it will show. Your objective is to understand your customer’s situation and needs as completely as you can. Be humble when appropriate, ask what may seem at first to be a basic question, and be comfortable reframing the question once again to ensure you understand the answer accurately.
It is a skill to artfully handle a problem participant in the classroom without disrupting the instructional design and experience for everyone else.
Any of us who have stood in front of a classroom or audience have experienced them…the “children” who demand extra attention, who seem intent on disrupting the program, who do not follow the basic rules of the facilitator, who complain about everything, and who act as “prisoners” rather than willing learners. Unless you have tactics to deal with them effectively, these problem children can completely undermine the purpose of the session and leave you humiliated, angry and ineffective.
Here are some tips on how to deal with these problems.
- The Ball Hog. For the participant who will not leave the “stage,” remain polite but convey that others deserve an opportunity to share their thoughts too. Another tactic is to postpone the discussion by suggesting that you spend some time together during a break.
- The Hider. When you encounter the polar opposite, someone who is reluctant to share their thoughts or to participate, set up exercises in pairs or small groups so they get involved with just a few people at a time. If you know their area of expertise, call upon them to share their special knowledge. You want to do whatever you can to give them opportunities to gain confidence and play a more active role in the session.
- The Fighter. A frequent difficult “child” is the one who finds fault with everything you say. They love to confront and argue. It is critical that you not be drawn into a war of words. You are the one who must remain calm, stay composed and regain control. You can either agree to disagree, suggest that you continue the discussion over break, or invite the other participants to weigh in on the topic. Sometimes that is the most effective way to silence the offender.
- The Clown. How about the comedian? This is the participant who seeks attention through inappropriate humor. Many will laugh out of embarrassment. It is up to you, however, to curtail these jokes. Redirect the class attention back to the topic at hand and encourage the clown to contribute serious thoughts to the discussion.
- The Whiner. There is then the “child” who complains about everything…the food, the room temperature, the uncomfortable seats, the exercises, the requirement to attend. This is the classic “prisoner.” Somehow you need to shift his attitude from negative to positive. Sometimes the class as a whole will censure this behavior. More often, you will need to sort out the root of the problem…perhaps at break. If you cannot find an activity that encourages a more positive attitude and he is poisoning the entire class, you may need to ask him not to return in the afternoon.
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A CEO recently told me that they do not have enough time to implement their strategy because they have too many “seller-doers.” At another client, the SVP of Sales lamented that her sales force did not understand their products and services well enough to close the bigger and more complex deals that are paramount to their growth plans.
Many firms struggle with the best way to have “sellers” and “doers” co-exist. While there is no magic across-the-board answer for every firm, it is always helpful to start with clear definitions and what is best for the customer.
We define “sellers” as those responsible for getting meetings with new target clients, closing new business, and expanding new business in current accounts. We define “doers” as those responsible for designing and delivering the final work product and servicing the client.
In many firms, the role of “seller” and “doer” overlaps to best serve customers and drive more revenue. While it is difficult to find (and sometimes afford) people with both skill sets, for many professional service organizations, the closer these two functions can work together, the more sales you will realize.
Best for the Customer
Here are two reasons from the customer’s perspective.
- Customers do not like the bait and switch. Customers are more savvy and demanding these days. And you, of course, want to encourage their long-term satisfaction and loyalty. This is more easily achieved if there is continuity throughout the sales and delivery process. While most sales people do not have the skill set to deliver the final goods, the farther your sales person takes a prospect to close, the more they need to be involved in the entire process.
It is one thing if they are just opening the door and getting the initial meeting. It is another if they have managed to forge a trusted relationship with the buyer while positioning your firm for success. Most customers prefer working all the way through with the person who has built their trust and who will be accountable if things go wrong. Either the salesperson should be involved as a partner in the early stages of the product development or your “doer’ should have the skills and authority to complete the sale in a way that makes sense.
Have you defined clear roles, responsibilities, and hand-offs based upon key buyer behaviors?
- Customers want to feel comfortable and confident that you get it. Knowledge and experience create confidence and credibility. If there is any disconnect between what there is to sell and what you are trying to sell, you will lose customers.
For example, many field engineers may not want to do the kind of networking and relationship building that is the stock in trade of good salespeople. But often sales folks do not have the technical expertise required to create a value-added solution that makes sense form a customer’s perspective. If sales and engineering work hand-in-hand, however, together they will be far more successful as a team.
How can you position your teams to best play to their strengths to serve your customers?
There is value and necessity in the strengths of both sellers and doers. In fact, if you want to increase the appreciation of these two factions in your company, expose them to the others’ role. Cross-training can produce a hybrid, the best of both worlds. Your business developers will learn what it is like to do the actual work of production. Your doers will learn how hard it can be to reach out and develop the initial customer relationships.
When you ask whether you as a business leader should emphasize doing over selling or selling over doing, perhaps a better question would be, “How do I blend the roles so the teams can work together?”
Not only will the customers win as they gain continuity and accountability from end to end, but your company will also win as sales are bound to increase through effective teamwork and knowledge sharing.
Competencies demonstrate the ability of an individual to do a current and/or future job well.
The term first appeared in 1959 in an article by R.W. White as a tool for managing performance. Now over 50 years old, we may well wonder if the concept is still useful in managing and motivating performance. Especially now with software tools available to manage and implement competencies, we maintain that competency management can be more critical than ever for the success of an organization.
Competency-based management depends upon strong connections between business planning and human resources planning. Once the organization’s overall strategic plan is in place, human resources and the business can help to identify the core competencies required to fulfill that short and long-term vision. This includes isolating the specific on-the-job skills, abilities, knowledge, behaviors and motivations necessary to achieve the desired results.
Once finalized with the business, the list should be applied to five main phases of human resource management.
- Branding, Recruiting, Interviewing, and Hiring. Hiring staff should be well acquainted with the competencies required so they can recruit for and select talent according to those behaviors. Anyone interviewing, too, needs to be aware of and test for desired behavioral traits.
- Learning and Development. New employees as well as experienced employees should be exposed to multiple learning and development opportunities that assess, develop, foster, and measure the identified behaviors at various levels of proficiency and stages of a career.
- Performance Management. Managers should be well versed in core competencies that are highly valued and give feedback through ongoing coaching to support while encouraging the desired behaviors and providing uncomfortable consequences for those who do not fit.
- Compensation and Rewards. All remuneration and reward systems should also be based on the behaviors identified as fundamental to the organization’s success. By compensating those who exhibit the desired behaviors, others will be encouraged to follow.
- Succession Planning. Promotions and succession planning should rely upon performance and core competence proficiency to create alignment.
The stronger the links from one phase of the operation to another, the more embedded the competencies will become in the organization. This is not to say, however, that the list is cast in stone. On the contrary, it is important that the list shift as the needs of the organization change. As requirements change, so should competencies adapt over time.
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Competency-based management also depends upon the ability to analyze gaps in competencies and then to structure a program to close the gaps. With proper application, productivity can be significantly enhanced as the skills needed are put into use.
Competency-based management is a strategic tool for success because it links organizational strategic planning to job execution.
An efficient, effective sales team is a beautiful thing and it deserves loving care.
Although external factors in the industry or economy can clog up that smooth running engine, there are internal factors over which you have control that need your attention. As a sales leader, it is up to you to do all you can to keep your sales force engine in good working order and with all gears in sync.
Here are three areas to get right.
- Create an Effective and Consistent Sales process. Identify, adopt and implement a sales process that makes sense…not just for you as manager but for every member of your team. Document the process and keep everyone on track. It is important that all salespeople follow the same procedures from initial customer contact through successful sale and follow-up. Otherwise, there is confusion as team members run their own show and approach business from different directions…often at odds with other members of your organization.
- Do not tolerate poor performance. The consequences of retaining salespeople who are not performing according to team standards are twofold: overall sales numbers are dragged down and higher performers lose heart. It is easy to understand why. Imagine that Lisa is working hard to reach her team goal—following process guidelines, connecting with customers regularly, creating customized solutions for individual customer needs, etc. Next to her at team meetings sits Dana who makes little effort to prospect, keep in touch with current customers or understand their problems…and his sales results are correspondingly poor. Lisa could well wonder why she should continue her conscientious and dedicated effort. Her morale and the morale of other high performers suffer and the success of the whole team is threatened.
- Invest in On-Boarding. As you fill open slots, invest heavily in your new hires. Though it may be tempting to focus on your already productive salespeople, think about what an effect eager, well-trained, well-oriented new salespeople could have on the team as a whole. The more effort you pour into introducing new hires to your organization, to your product/service, to your sales process, to your customer base, to your competitive challenges, the more likely they are to hit the ground running. By incorporating the new hires into the team quickly, you secure their feeling of belonging and their commitment to the team goals. They are less likely to leave and you avoid the cost in time and money of starting to hire replacements all over again.
Keep your sales engine running smoothly with a finely tuned sales process, high performing team members and well-integrated new hires.
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