Dea(r)th of a Salesman, Part 2.

(With apologies again to Arthur Miller)

In last week's post, I wrote about the death of sales training initiatives. This week, I will focus on how sales compensation programs often don't provide the motivation that they should.

Three compensation strategies in common use are:

• The100% monthly commission program.
• The “extra bonus when you hit your target” strategy.
• The geographic quota plan.

Each of these plans can work, but they also have pitfalls. And, too often, I find them used in place of active sales management.

The 100% Monthly Commission Solution

Managers like simple plans. Simple to understand, simple to forecast, simple to implement.

An obvious strategy is to pay a commission on every sale. Period. No salary, no bonus, no SPIFFs, just a straight commission. This is easy to administer. No budgets, quotas, or targets are required. And it has a good cost control mechanism built in: if sales fall, so does compensation.

So, what's not to like?

In this scheme, the salesman very quickly sees that his ability to put food on the table this month is directly related to the number of deals he closes this month. And so, predictably, he focuses all of his attention on those “high-potential” prospects that are likely to buy this month. Those that need some extra attention, or aren't quite ready to sign, will (maybe) get looked at later.

Ironically, the common sign of a problem with this approach is the management complaint that sales people won't spend time on long-term relationship building activities.

If you want your sales staff to spend time working on long-term projects, you need to think beyond the 100% commission program. Options could include:

• A base salary with a lower commission rate on top.
• A bonus program that includes incentives for completing non-sales objectives (cold calls, relationship building meetings, competitive analysis, new account recruiting, etc.)
• A multiple rate commission plan that puts special reward on certain types of accounts.

Each of these can help shift the salesman's focus into different time frames and activities. Unfortunately, they also require a higher level of active management on the part of the Boss.

The “Extra pay when you hit your Target” Program.

This approach ties commissions and bonuses to annual targets or quotas. Again, this has a cost control benefit: those that hit the higher sales numbers get the extra amounts. It can be very effective, but you should be aware of the downsides.

First, targets set exclusively by senior management are often viewed sceptically by the sales staff. They are perceived as a strategy for Not Paying Commissions, which obviously decreases their motivational impact.

Second, they really only motivate the sales people that believe their normal performance will get them close to the goal. Those that believe they are very unlikely to hit their targets are not motivated to work harder. Similarly, those that think their normal efforts will put them well beyond the targets aren't motivated either. Consequently, only the staff in the middle of the pack will think of this extra money as a reason to put forth extra effort.

The Geographic Quota Plan

This common strategy bases sales quotas on population stats. It is certainly convenient, and takes the appearance of arbitrary decision-making out of the equation. It is also easy to sell to senior management, who may not know much about the sales staff, but can read a map and population tables.

Unfortunately, I have rarely seen a population-only quota system that actually works. Too many other factors can come into play:

• Different economic activity levels in the regions, for reasons other than population.
• Different competitive positions in the regions.
• Different strategic account penetrations among the regions, etc.

All of these factors can produce good and bad sales performances among the regions, not directly tied to the skill and efforts of the sales staff. As a consequence, motivation suffers.

I once worked in partnership with a company in Canada that had 7 sales reps across the country. Each rep had an annual sale quota based on population but, because of outside economic issues, one region significantly outperformed year after year (and one rep significantly out-earned all of the others.) In order to keep the plan “simple” and still keep it “fair”, the company took the expedient of capping that one rep's annual compensation. He responded by only working 3 days a week every summer, giving him more time to spend on his boat.

The point I would like to end with is this:

• It is easy to come up with a sales compensation plan that is simple to implement and manage.
  
• It is hard to come up with one that actually keeps all of your sales staff motivated, unless you add some significant sales management effort.

Keeping your sales staff motivated takes a lot more than just a simple commission plan.

Dea(r)th of a Salesman, Part 1.

(With apologies to Arthur Miller)

Far too often we hear the complaint, “I can't find enough good salespeople anymore.” I don't think salesmen are too hard to find, just hard to develop and keep because of prevailing business attitudes.

I like salespeople. I like them because they use their smarts, personality, drive, and initiative everyday in an extremely difficult environment. I like them because they persevere under very trying conditions. I like them because they enjoy being with other people. (Further, I like them because I am one!)

But they have become the most under-appreciated, misunderstood, and scapegoated employees in business today. I have two peeves about the way businesses treat their sales staff:

• Sales training has become almost non-existent , to the detriment of both the sale staff and the business. (The topic of this post.)
  
• Commission programs have become a poor and ineffective substitute for Sales Management. (Next week's installment.)

Why everyone benefits from sales training, and why it has disappeared.

The best known and most profitable companies in the past always had great sales organizations. (Think IBM and General Motors.) The activities of the sales department were the public face of the company, and a key differentiator between organizations. Successful companies put a lot of emphasis on sales training, to ensure the job was being done right, done differently than the competition, and done in a way to enhance the company image.

This approach worked well. Salespeople learned all about the product, and what the customers were looking for. They learned how the company's products helped the customers in their everyday life, and how they were superior to the competition. They also learned how the company expected to be represented to the buying public. That's the kind of training that makes salespeople and companies great.

Somewhere along the way, this concept got lost in the desire to hold down costs. The reasons given to justify reducing training efforts are:

• With high sales staff turnover, whatever training you do will just benefit the next company (competitor?) that hires them.
  
• If you hire salesmen from the industry, sales training is not needed.
  
• If you hire great sales staff, they will resent you trying to tell them how to do their job.

The answer to all of the above is three simple words. Ba. Lo. Ney.

The current issue of the Harvard Business Review has a great article on sales staff turnover, and a key element is the lack of training, mentoring and career development. So, if your turnover seems too high, INCREASE training, don't cut it back. Good salespeople want to be appreciated, and want you to show that by investing in them.

Another fallacy is that if you hire from withing the industry, more training isn't required. This logic only holds if your competitors do a great job of training. Yet, as the above paragraph states, if they were doing a great job of training, they probably wouldn't be losing their good salespeople to you. Further, sales training gives your staff the tools they need to differentiate your company from the competition. And that is something only YOU can do.

Finally, good salesmen are looking for leadership, and the training you offer is part of that leadership. Show them what you want done, why you want it done that way, and how it will benefit both them and the company. Good people will appreciate your efforts and your commitment to them.


So, What is the real reason behind this Lack of Training?

I think, often, small business senior management has become remote from both their customers and the selling process. They have completely delegated the selling function to others, and are too removed from the activity to feel comfortable in the training role. They use the excuses given above, and abdicate their responsibilities.

Everyone suffers. The Business. The Boss. The Salespeople. The Customers.

Practical Tip of the Day:

Option #1: Spend some time on the road with your salespeople. Find out how they spend their time, and what their accounts are saying. Firsthand. Look for patterns that training could improve.

Option #2: Look for some “Best Practices” opportunities. What are your best people doing that the rest of the staff could benefit from learning? The top people will appreciate the attention, and the learners will appreciate the advice.

Next Post: Counter-Productive Sales Compensation Plans.

The Great Sales Training Myth

As mentioned in previous posts, I have worked for several organizations, in both sales and marketing positions. Some of these companies were very large and (supposedly) well organized, while others were small operations trying to grow any way they could.

One phenomena I often saw involved the Great Sales Training Myth. The purpose of the myth was to excuse management from having to provide any relevant training for the sales staff. It wasn't phrased that way, of course. Instead, what you heard was:

• “We hire only professional sales people, who are already trained.”
• “If we gave them more training, they would just leave and go somewhere else.”
• “The good ones would be offended if we tried to tell them how to do their job.”
• “If they would just work harder and sell more, everything would be fine.”

And to all of those bosses who used these excuses to save themselves some money and effort, I say You are Complete Idiots!

The sales staff is the customer-facing part of the company. These are the people who interact with your customers every day, for good or bad. If the sales staff doesn't create a great impression in the mind of your prospects, all of the money spent on advertising has been wasted. If the sale staff can't effectively close leads because they don't know (in detail) how customers use their product, then all of the marketing efforts are for naught.

A well-trained sales staff can make up for weak marketing, but it can perform twice as well when given the benefit of great marketing. But even a well-trained sales staff cannot make up for weak product or poor customer service.

Lets answer the four excuses listed above:

1. Even “professional” sales people bring both the good and bad experiences from their past employment with them. You should take the time to train them to seek the customers you want, to promote the benefits you offer, and to make the kind of lasting impression you deserve.
   
2. Good sales people want to be successful, and they want some appreciation for their work. If you don't invest some training time into your staff on a regular basis, they will look for other job opportunities that do offer the recognition they seek.
   
3. The “good ones” want new opportunities to succeed, and will be ready to soak up any good information you can offer. This assumes, of course, that you really know what you are talking about. The good ones don't want you to waste their time.
   
4. Finally, if you really think that having your sales people “just work harder” will bring great results, you most likely have deeper problems to deal with. It's usually a general marketing problem, not a sales problem.

Don't skimp on training and skills development with your sales staff. A small investment here can have a huge pay-off.

Practical Tip of the Day:

In addition to the points listed above, your sales people should be a great source of information about the competition, and your customers' expectations. Get your people together often, and listen with an open mind to what they have to say about their selling environment. It can be very enlightening.