Sales Compensation and Motivation Feed

How to Devise a Structured Sales-Compensation Plan

ChadBronsteinToday’s guest post is by Chad Bronstein, founder and CEO of Time to Hire, a company that uses proprietary keyword algorithms to comb through more than 100 million resumes on CareerBuilder, Monster, and other job search sites to find and match qualified commission-based sales reps for major companies, including Time Warner, Home Depot, Comcast, Verizon, Sears, and more.

Sales-commission structures can make or break business growth, yet many companies don’t give them the attention they deserve.

The key is to design, create, and implement a plan that continually evolves alongside the business. Organizations must have a clear understanding of the goals they’re trying to achieve and then tightly integrate them into the compensation structure so that it incentivizes actions that, not only promote growth, but have direct positive impact on employee earnings and the organization’s bottom line.

To get started, organizations need to do a reality check by considering these questions:

  • What size is the company?
  • How new is the company to the market?
  • How big is the company’s market share?
  • How long is the sales cycle?
  • What type of growth is the business trying to achieve?

Answering these questions will help determine the optimal commission structure. Remember, it should be aligned it with goals that drive increased profit. 

Once these basic questions are answered, organizations should begin outlining a plan in four main areas:

  1. Strategy: Do you offer increasing commission over time or after a certain number of successful sales? You need to intentionally design the commission plan so it accelerates reps through the ranks.
  2. Payout structure: Will you pay reps a set rate per close or base pay on profit margin or something else? This depends on your business’s product/service.
  3. Performance benchmarks: How will you monitor, manage, and report to your sales team? Are there certain quotas to meet? What are the monthly or quarterly goals? Are sales reps competing against each other?
  4. Problem procedures: Issues can and will occur. What if two reps determine they have closed the same client? There must be a clear plan in place that eliminates debate or arguments.

Next, the management team needs to clearly communicate what the compensation plan is intending to accomplish. To do this, the plan should be

  • well documented and freely available to all staff and potential candidates;
  • extremely simple, with no fine print, legal language, or confusing words;
  • clear about what needs to be accomplished to reach certain goals;
  • fair and enticing to both the employer and employee. 

Bonus tip: If the company is new, selling a new product, or entering a new market, it will require above-average compensation to attract the best salespeople. High-performing salespeople understand the value they bring. Before joining a new company, they consider the pros and cons by weighing potential earnings against potential risk. 

Finally, organizations must consider the specific elements of a commission structure and calculate the fine details:

How do you figure out the acceptable payment range?

Many companies determine fixed commissions by looking at the cost per good sold and base that against potential profit and earnings. Unfortunately, this approach tends to be complicated, as it can be calculated by using just manufacturing costs or by adding marketing, administrative, and other expenses.

How do you choose a type of commission? 

Companies that have room to negotiate price will typically use percentage of profit to drive the highest possible close. Others use a fixed commission per sale, but ideally there should be incentive for improvement by offering a commission “ladder.”

Additional considerations while working on a compensation plan:

  • Test out multiple structures over a certain time frame.
  • Ask candidates or current salespeople what would interest them.
  • Track all of the metrics involved in the commission structure.
  • Leave room in the budget for spur-of-the-moment sales contests.

By spending the additional time and effort to create a comprehensive plan, organizations can ultimately position themselves for higher growth.

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Four Ways to Think outside the Sales-Compensation Box

ErikCharlesToday’s post is by Erik Charles, incentives strategist at Xactly Corporation. For more insight on compensation and sales leadership, listen to a recording of his recent Webinar, “How to Become a More Creative Sales Leader,” with Selling Power founder Gerhard Gschwandtner. 

When it comes to sales compensation, some sales managers play it safe because they don’t believe they can disrupt the status quo, but there’s innovative potential in all of us to make positive changes. Here are some ways sales managers can get creative about aligning, compensating, and motivating their teams. 

Tip #1: Differentiate by role. 

Many sales organizations don’t differentiate by role, but this is a mistake. People like to know where they fit in the team. Knowing how his or her specific role helps the company meet its goals can inspire each employee to perform better.

The varying positions in sales require people with very different skill sets and personalities. Having a “farmer” on your team who handles renewals and reaches out to existing clients lowers your churn rate and ensures that you keep existing customers while taking on new ones. Similarly, it works in your favor to have a “specialist” who speaks your customer’s language. This person likely has a strong background in customer support, understands every technicality of the product, and can provide support during demos.

Tip #2: Provide quota relief.

Two decades in the sales industry has taught me many things that often surprise sales leaders, one of those things being that quota relief, the act of lowering a rep’s quota due to extenuating circumstances, can be necessary and even result in higher performance. It’s all about market consideration. Let’s say there was a major natural disaster in a rep’s territory. It’s likely to legitimately affect his or her ability to close deals. Relief should be considered in this instance.

Tip #3: Promote cross-sellers.

If you want to promote a rep to a management position, don’t the common mistake of promoting your best hunter. Instead, look for ones who cross sell like champs. Why? Great cross-sellers are skilled at seeing things from different perspectives. That’s a trait that is more likely to help them succeed in a management role. 

Tip #4: Experiment with incentives.

Has it been a while since you used a SPIF? Maybe it’s time to put more than just cash on the table. Tap into your reps’ personal interests. We’ve seen World Series tickets work wonders as a sales incentive. My guess is that the status symbol of being at the game, your colleagues knowing you won, and the ability to publicize being at the game on social media outweighs a bonus check of equal value. 

To find out more ways you can innovate as a sales leader, listen to a recording of the recent Webinar “How to Become a More Creative Sales Leader.”


Don’t Let This Problem Demotivate Your Sales Force

ScottBroomfieldToday’s post is by Scott Broomfield, chief marketing officer at Xactly Corporation. Click here to listen to a recording of a recent Webinar, “Motivating a Multigenerational Sales Force,” hosted by Xactly and Selling Power. 

Remember when you were a kid and got a weekly allowance for doing simple tasks, such as raking leaves in the front yard, making your bed, or helping your mom do the dishes? You knew that, to get your $10, you had to get your chores done.

Now imagine if you finished all your chores but received only $5. This would have limited your ability to buy candy, comics, or toys, not to mention make you resentful and question what you did wrong to receive less payment.

When a kid isn’t paid his or her allowance in full, no matter how sassy the kid gets, there are no major repercussions. When a rep is paid only half the bonus promised or an incorrect commission, you can bet there will be a multitude of repercussions.

One of these negative repercussions is a lack of engagement. Research shows that 18 percent of employees are actively disengaged in their work. Gallup estimates that these actively disengaged employees cost the United States between $450 billion to $550 billion each year in lost productivity. They are more likely to steal from their companies, negatively influence their co-workers, miss workdays, and drive away customers

Along with repercussions for your company, underpaying your salespeople affects their personal life. They depend on their paycheck to keep the fridge stocked, pay the mortgage, and keep the lights on at home. How long do you think a rep will stick around when his or her buddy says that those kinds of mistakes never happen at his organization? The answer: not for long. People want reliability, especially when it comes to compensation.

In addition to losing rock stars, there are many other consequences of an unreliable, manual incentive-compensation system. When reps don’t know what their commission will be, to what business win their check is related, or even when it’s coming, what you have is a reward system, not an incentive one. So what’s the difference? An incentive system sets specific goals wherein salespeople know that if they perform X, they will receive $Y. This is much more effective in inspiring the behavior you want from reps than a reward system, which generally just gives reps a check that is not tied to any specific behavior.

When you have an automated incentive-compensation system, reps have visibility into their attainment metrics throughout the entire quarter, instead of waiting to be handed a report a few days before the check is cut. With this kind of transparency, employees are able to see just how many deals they need to bring in to make quota and exactly what their quota attainment will be if they make their numbers – no guessing and no time-wasting disputes.

The kids in the featured video know instinctively that being underpaid is wrong. They know that getting accurate payment is fair, and they know that they would be unhappy and “sassy” if they weren’t compensated properly for their hard work. If a group of elementary school students are aware that doing chores and then being paid incorrectly will negatively affect their behavior, don’t underestimate your sales reps’ reactions to incorrect payment. No one likes a sassy rep. Well-paid reps are happy reps, and happy reps are more likely to perform at the peak of their ability.

Click here to listen to a recording of a recent Webinar, “Motivating a Multigenerational Sales Force,” hosted by Xactly and Selling Power. 


Yes, Incentives for Channel Sales Reps Are Worth It!

Mike-SpellecyToday’s guest post is by Mike Spellecy, vice president of solution thought leadership at Maritz Motivation Solutions.

 

 

In an increasingly complex marketplace, it can be argued that channel partnerships are the most crucial to a business’s success. In fact, more than 90 percent of today’s manufacturers rely on multiple channels of distribution to sell and move their products.  

Of course, simply engaging in a channel-partner relationship doesn’t automatically guarantee business success. Realizing that channel reps most likely have the ability to sell competitors’ products, many organizations look to incentive programs as a way to maintain channel loyalty. But how effective are these programs? 

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Image via freedigitalphotos.net / digitalart

To address this question, Maritz Motivation Solutions surveyed more than 1,000 sales professionals from a variety of industries. Here are the findings:

  • Sixty-seven percent say that rewards and incentives are extremely important to job satisfaction.

  • Seventy-seven percent are more willing to sell a manufacturer’s products and services if they offer a reward and incentive program.

  • Eighty-one percent agree that the opportunity to earn rewards and incentives from manufacturers strengthens their ongoing relationship with them.

But aside from increasing interest and loyalty to a brand, channel-incentive programs have a positive effect on sales results. According to the survey respondents, more than one-third of sales were attributed to the effort to compete for and earn rewards. Imagine losing a third of your business for failing to meaningfully incentivize your channel reps!

So channel-rep incentives do work, and they have a powerful effect on reps’ performance; however, there are a lot of incentives. Seventy percent of survey participants were offered two or more incentive programs from manufacturers, channel-loyalty partners, and employers. On average, channel reps had the opportunity to participate in 3.9 incentive programs!

To get salespeople’s attention and stand out from an influx of competitive offers, you need to develop a compelling program that focuses on the individual. Almost 7 in 10 channel reps believe manufacturer-provided incentive opportunities should be based on personal performance, as opposed to team performance. Incentive programs that take into account individual motivations, individual communication preferences, and an ongoing awareness of an individual’s performance offer the best chance for driving true loyalty in the channel.

If you’re still on the fence about implementing a channel-loyalty program, it’s time to rethink your approach. Channel-rep incentives, when strategically designed and implemented, do work. 


Team Goals: My Chat with Pro Football Hall of Famer Ronnie Lott

Cabrera_newToday's blog post is by Christopher Cabrera, CEO of Xactly Corporation.

 

 

Recently, I sat down with Pro Football Hall of Famer Ronnie Lott to talk about how properly aligned goals lead to motivated teams and ultimate success.

It was a great conversation and an honor to chat one-on-one with a superstar athlete who helped win multiple Super Bowls and also achieved success in business later in his career. One thing he said that stuck with me was that it’s important to recognize that the game is bigger than you. This is the first step in aligning yourself with the team and the team goals – which is hard.

My new book, Game the Plan: Every Sales Rep’s Dream; Every CFO’s Nightmare, delves deep into the science of motivation: what really makes people tick and inspires performance for the team? After decades in the industry, I’ve seen more than a few managers who unintentionally demotivate their employees, and I’ve discovered quite a few “myth-understandings” about what truly motivates in the workplace.

Myth #1: Having a job should be motivation enough.

Sure, in a world where jobs are extremely scarce (Great Recession anyone?), having a job ismotivation enough. But you can’t really call this feeling motivation; it’s more related to fear and the anxiety that comes from having no other employment options. Buyers beware: if you subscribe to this tactic during lean times, expect a major pushback as soon as the economy improves – and it always does. There was a 37 percent increase in voluntary employee termination from 2009 to 2013. This loss of personnel isn’t just problematic, it’s costly. Losing an employee will cost your organization up to 1.5 times an employee’s annual salary.

Myth #2: Money is the greatest motivator.

According to Mindflash, being fully appreciated for completed work is more important than money for most employees. Sixty-seven percent say praise and recognition from a manager is the most effective motivator. Don’t get me wrong, money matters – a competitive salary is important for retaining rock stars – but when it comes to motivating and engaging employees, pats on the back, plaques, and public recognition go far in making them feel like appreciated members of the team.

Myth #3: Nothing lights fire like fear.

How can you tell if you’ve gone too far? If you think Meryl Streep’s character in The Devil Wears Prada was just misunderstood, you’ve already crossed the line. Fear is a temporary motivator that creates a stressful and unhealthy work environment, not a viable long-term strategy. While being terrified of a boss will “inspire” temporarily, burnout, absenteeism, and health problems are likely to ensue. It’s estimated that $300 billion is spent every year on costs related to workplace stress.

Myth #4: Good motivation theories and practices will work for all employees.

There is no one-size-fits-all approach to employee motivation. This is especially important to remember when you consider that engaged employees produce 50 percent more work than disengaged employees. Different tactics inspire people born in different generations. A Gen Yer might need accolades for every completed project, while a Gen Xer may place a high premium on work-life balance. Do your homework and you’ll soon reap the benefits of motivating according to the unique makeup of your workforce.

Myth #5: Sales reps are either naturally motivated or they aren’t.

Everyone is motivated by something; it just takes time to find out what it is. With $350 billion lost in productivity annually because of disengaged employees, companies can’t afford to segment employees into limiting categories. Everyone has the potential to be motivated. Even the rep you catch playing video games during working hours has some motivation behind his or her actions. If you don’t learn what that something is and figure out how to direct it toward work, you could miss out on a highly productive employee.

If you’ve been using any of these tactics to “motivate” your employees, it’s not too late to change your ways. Just remember that motivating isn’t a guessing game, it’s a science. Use the empirical evidence outlined above, and before you know it, your personnel will be performing at peak ability.

Hear more about motivation myths in the Webinar recording “Game the Plan: Review, Strategize, and Win in 2014.”


The Evolution of Incentives

Cabrera_newToday's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

 

Throughout history, incentives and rewards have driven human motivation and behavior. Here are a few examples taken from my forthcoming book, Game the Plan: Every Sales Rep’s Dream; Every CFO’s Nightmare,of how incentives have evolved throughout the decades.

The 1920s

During the Roaring Twenties, companies began manufacturing new machines (including cars and appliances) on a massive scale. These companies needed droves of salespeople to court customers. Such large companies as Coca-Cola and General Electric assigned territories, set quotas, and began to measure salespeople’s success. To keep up with the competition, they also began to focus on professionalizing their employees and rewarding them with cash bonuses and induction into elite clubs.

Eventually, an imbalance between labor supply and demand, coupled with the Great Depression, put incentives and bonuses on the back burner – but only temporarily.

The 1940s

In the forties, organizations moved beyond the idea of using incentives to drive only better behavior in general and focused instead on how they could be used to drive specific behaviors, such as selling a certain number of units in a set time period. Companies shifted away from the large “gift” bonuses of the ’20s and instead used a new structure in which bonuses were paid out in three to five years, when specific long-term goals had been reached. These types of incentives were created to help employees focus on the long-term prosperity of the company rather than the immediate gratification of cash bonuses.

The 1950s

Salespeople in the 1950s wanted a comfortable life with status symbols to spare. This decade introduced perquisites, commonly known today as “perks.” Due to changing tax laws, companies needed a way to motivate the work force that didn’t involve money. Perks were just the answer they were looking for. Salespeople in the ’50s were motivated by the promise of fancy company cars, country club memberships, private secretaries, and the use of vacation homes.

The 1990s

Before the boom, dot-coms were cash strapped. Thus, stock options were seen as a great way to attract and keep talent (at least until options vested). In addition, stock options contained a built-in incentive: eventual payout was tied to company success, which guaranteed that employees would work hard to make sure the company was thriving. Imagining the possibility of an IPO like Starbucks (with market caps that grew at an astounding rate) was enough to incent employees to work as hard as possible.

Today,many companies are doing it right by

  • fostering improved quality of life by offering free food at lunch and dinner, massages and yoga, and backup child-care assistance (Google);
  • helping employees juggle work, family, and a social life by offering such services as dry-cleaning pickup and car servicing (eBay);
  • encouraging fun by offering Ping-Pong tables, Hackathons, and scooters in the office (Box.com);
  • providing unlimited vacation days to enhance employees’ desire for freedom and autonomy (Netflix).

For a more detailed account of how incentives have evolved, check out my new book, which will be released on January 28, 2014. Find out more at www.GameThePlan.com.

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Five Ways You Can Manage Risk in Your Compensation Plan

Cabrera_newToday's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

 

In the past, managing risk was a topic that flew under the radar in the sales-compensation world. Today, experts in the field are bringing the topic to light. Managing risk is no longer just an abstract idea; it’s a mind-set that must be applied to the entire sales-compensation system. So how can you avoid leaving your company vulnerable to unforeseen costs, turnover, and uncertainty?

1. Analyze sales crediting.

In order to manage risk in your compensation plan, sales-credit rules must be examined carefully. When Xactly analyzed existing sales-comp data, we found as many as 160 commissions being paid out on one deal! This is a big problem. The cost is excessive, and if the company is still calculating compensation on spreadsheets, the true, comprehensive cost of the deal is likely not understood.

Get a read on your current crediting status by asking these questions:

  • Does the type of product sold change the amount of credit that’s given?
  • Does the type of customer alter the amount of credit given?
  • How much credit does each role receive?

2. Ensure that governance is in place.

Governance gets a bad rap in the field, but if you’re tightening your operation, governance has to have a part. To implement it properly, departments need to come together and communicate with one another. Human resources, sales, finance, and legal all need to be invited to the party – and they need to mingle.

Finance leaders claim they’re paying too much; sales reps say they’re not getting paid enough. With governance and an on-demand compensation solution, these communication issues are eliminated, and all departments can learn to play nice.

3. Use a plan-effectiveness metrics tool.

A tool to look at the analytics of geography, position, business unit, performance distribution, and pay differentiation is imperative. This will give you rich information so you can discern what’s working and what’s not in your incentive-compensation plan. It also provides insight into the financial and behavior risks your company could be facing.

4. Use an incentive system instead of a reward system.

How can you tell the difference? In a reward system, you hand a rep money and say, “Thank you for working hard.” The end.

In an incentive system, compensation drives behavior. Sales reps will look at the plan and modify how they sell, where they sell, and to whom they sell in order to be compensated accordingly.

5. Spot red flags.

Do any of these scenarios sound familiar? Your company is making money, but your reps are coming up short. Quota attainment is lagging. There’s an elevated rate of turnover.

These low-level problems are indicators of stormy weather ahead. Signs like these indicate issues that need to be remedied and the need to adjust your sales-compensation plan. Higher-level problems would include unhealthy levels of channel conflict, rising cost of sales, and poor turnover management.

Remember that managing risk is a team effort. It takes communication, teamwork, and the engagement of human resources, finance, and sales to do it effectively.

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7 Ways to Design a Better Compensation Plan

Cabrera_newToday's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

 

Do you have a devil of a time designing an incentive-compensation plan that motivates your employees and boosts your bottom line? Or maybe the plan is overly complex or isn’t clear enough to convey company priorities to the sales team.

It could be that you’re committing one of the seven deadly sins of incentive compensation.

Michael DeLeonardis, Xactly’s Vice President of Insights and Benchmarking, has examined eight years’ worth of sales-performance data to uncover the comp-plan demons that can damage profit and put your business at risk. Here’s the list he shared in a Selling Power Webinar earlier this month. 

  1. Poor alignment with business objectives. Misalignment usually creeps in with the details of a comp plan. Ramping up sales quotas is one example. It’s a fairly common practice to have lower quotas at the beginning of a sales period, when the emphasis for reps is on building pipeline. Over the course of the sales period, quotas increase. The problem crops up in companies that already struggle with “hockey stick” sales, when the majority of transactions come at the back end of the sales period. Ramping quotas in that scenario further encourages the sales organization to push deals later into the period when quotas are at their highest.

  2. Lack of traceability. To design an optimal incentive-compensation plan, businesses need to be able to pull in data from various systems (such as CRM). Without traceability, they hamper their own ability to directly tie sales reps’ behavior to their payments, measure company and individual success, and thoroughly audit payments.

  3. Not developing benchmarks. It’s critical for companies to effectively measure incentive compensation and sales performance, and benchmarking is a great way to get valuable insight. Organizations can decide which type of benchmarking is right for them: benchmarking against an aggregate group or industry standards or self-benchmarking against goals established at the beginning of the year. With the right data, companies can identify variations from region to region, product to product, and sales rep to sales rep.

  4. Excessive plan components. Xactly research confirms the rule of thumb that three is the ideal number of measures in a compensation plan. Six and seven components indicate an organization that, in effect, is using its plan as another sales manager to compensate for weak leadership.

  5. Excessive credit assignment. About 75 percent of companies credit five or fewer people for each deal. For businesses with complex sales cycles, that number can reasonably go as high as 30. Some outliers, however, credit 161(!) people for a single deal. They may not have the data to credit individuals accurately (remember number 2, lack of traceability), so they move to a team-based model and credit an entire region. In such situations, it’s impossible to tie sales behavior to results.

  6. Compensation plans that don’t motivate. Holds and releases are demotivating because, by the time sales reps get paid, months may have passed and they’ve lost the connection between behavior and reward. A better approach is to break the plan into components: pay a portion of the commission on booking, for example, and the rest upon invoicing or collection.

    Capping commissions is another demotivating practice, and it can prevent sales reps from achieving to their full potential. A recent AMA study tested the theory and found that salespeople performed 24 percent better when they were switched from a fixed bonus plan to an uncapped commission plan.

  7. Eroding profitability through accelerators. Accelerators absolutely motivate salespeople to sell more, but too many unexpected payouts can cut into profit. To help avoid that risk, try modeling three scenarios in your plan-design phase: what you expect sales performance to be, what would happen if a few high-performing reps carry the company and earn far more than expected, and what your financial exposure would be if a large percentage of reps outperform the plan. From there, you can plan for the financial downside or adjust your plan to avoid the exposure.

Listen to the Webinar recording here: The Seven Deadly Sins of Incentive Compensation.

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New Ways to Pitch and Other Advice for Sellers from Daniel Pink

Cabrera_newToday's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

 

Author Daniel Pink writes extensively about work and human motivation, and in To Sell Is Human: The Surprising Truth About Moving Others, he writes in particular about the motivation of salespeople. I wrote earlier this year about his view that, for many people, autonomy, mastery, and purpose are more motivating than money.

Earlier this month, Pink discussed the more tactical side of sales in a wide-ranging Webinar hosted by Salesforce.com. Buyers today are likely to have as much product knowledge as sellers, so he offered some tips on how sales organizations can adapt.

  • Be more consultative. Buyers can gather basic information about products on their own, so the sales role has shifted. Now there’s a new premium on expertise. As always, sales leaders need to be experts in their own product offerings, but they need to be almost as well versed in the buyer’s business.

    The most successful salespeople, especially in B2B, will be the forward thinkers who can help buyers “uncover problems that they didn’t realize they had,” said Pink.
  • Look beyond the extroverts. Research shows that extroverts are more likely to go into sales, get hired into sales jobs, and get promoted.  But, Pink said, “when scholars have looked at the link between extroversion and sales performance, the correlation is basically zero.”

    He cited a study by Wharton professor Adam Grant, who compared the performance of introverted and extroverted salespeople. The extroverts did a little better than the introverts, but not much.

“The big story here is that neither the introverts nor the extroverts did nearly as well as a third group: the ambiverts,” ­said Pink. These are people who land in the middle of the spectrum. Ambiverts by far make the best salespeople, according to Pink, because “they have a wider repertoire of skills. They know when to speak up, they know when to shut up. They know when to push and when to hold back.”

  • Know the modern ABCs. “Always be closing” is no longer the sales mantra. Social psychologists, behavioral economists, and others who study the way people make decisions have identified three qualities for being effective in the new world of sales:
  1. Attunement – the ability to see something from someone else’s point of view.
  2. Buoyancy – the ability to stay afloat in the “ocean of rejection” that comes with selling.
  3. Clarity – the ability to move from merely accessing information to curating and making sense of it. This ties in with adding value by identifying future problems, not just solving current ones.
  • Find new ways to pitch. Salespeople are familiar with the elevator pitch, but smart salespeople broaden their repertoire. A few examples:
     
    • Pitching with questions gets buyers to come up with their own reasons for agreeing with salespeople (effective when the facts are on your side).
    • Pitching with rhyme, oddly enough, increases “processing fluency” and makes ideas stick. Compare the phrase “Woes unite foes” with “Woes unite enemies.”
    • The one-word pitch is the one thing you want people to think about when they think of your product, e.g., MasterCard’s “Priceless.”

  • Hire good learners. If you’re looking to hire recent college grads, remember that they aren’t likely to have much of a track record. In that case, look for potential and eagerness to learn. You might think athletes perform well in sales because they’re competitive, but they (and musicians) often excel because they’re accustomed to practicing and realize that their performance affects others, and others affect them.

What do you think of Pink’s ideas about motivation? Share your thoughts in the comments section.

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Avoid These Common SPIFF Mistakes

ChrisCabreraToday's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

“SPIFFs are dangerous,” says Joseph DiMisa, a senior VP with Sibson Consulting. “There’s a need for them, but they’re dangerous.”

Dangerous? SPIFFs? The sales performance incentive funds that light a fire under salespeople so they move extra inventory, boost new products, or even spend some quality time with the CRM?  Those SPIFFs?

Yes, those SPIFFs, says DiMisa. At Xactly’s CompCloud user conference last month in San Francisco, he and other panelists elaborated on the downside of special incentives. The danger he sees is twofold:

  1. SPIFFs invite “whale watching.” Someone spots a whale on the left side of the boat, so the passengers all run to that side, but the whale is gone. Then it’s spotted on the right, and they all run to the right. The result? The boat – or incentive-compensation plan – lurches all over the place, directionless.

    If your sales team is constantly chasing SPIFFs, DiMisa says, “then your comp plan is off course.” The core incentive-compensation plan should drive your sales organization’s behavior and results.
  2. SPIFFs are like a drug!  They’re addictive: the more you get, the more you want.  If SPIFFs are too frequent or run too long, it’s difficult to pull them back. Reps start to think of them as a given. Companies typically spend 6–10 percent of their incentive budgets on SPIFFs, but DiMisa has seen them spiral as high as 18 percent.

Shawn Rossi of Mercer warns that SPIFFs can easily become a distraction and the ROI is fuzzy at best. When you figure in the cost and effort of getting the word out and running the programs, “It becomes a question of whether it’s worth it,” he said.

Yet another issue, says SalesGlobe’s Mark Donnolo, is that over-reliance on SPIFFs creates behaviors you don’t want. He likens it to Macy’s One Day Sales: everyone knows they’re coming sooner or later, so they plan around them to get the biggest payoff.

Clearly, there are plenty of pitfalls to watch out for when considering SPIFFs. But remember the other half of DiMisa’s statement: there’s a need for them. Pitfalls aside, SPIFFs do have their place and can be effective when implemented with care.

Here are some best practices to keep in mind for successful SPIFFs:

  • Make sure they’re programmatic and well thought-out. Know your expected ROI.
  • Use them judiciously. SPIFFs are effective when you’re launching a new product, for example, or if you have excess inventory or want to bundle products. Stick to specific scenarios. You don’t want to create a menu of incentives so that sales reps choose how they’re compensated.
  • Keep them short term, three months max.
  • Keep them infrequent. Two per year is plenty.
  • Make them unpredictable. This is the best way to avoid the “One Day Sale” syndrome.
  • Limit the cost to about 5 percent of your incentive budget.

Chad Albrecht of ZS Associates says following these guidelines will allow SPIFFs “to serve their purpose, which is a short-term gain or win based on a particular focus that you want to drive. Don’t overwhelm your sales-incentive plan.”

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