In sales, you would expect to have a sales commission as part of your pay package. If you are in pre or post sales, you would have a compensation plan. Sales and supporting sales leadership teams build these plans during budget cycles. Their purpose is to focus, motivate and drive a team to achieve revenue quota targets.
Cash generated from sales and alternative revenue and investment streams underpin business growth. Growth and investment plans need cash to pay for them. The cheapest source for this cash is to generate it from your existing sales business. Fail to meet expectations and the pressure felt within a business intensifies.
Commission and compensation plans need to incentivise success. They may drive one or a portfolio of products, services and solutions. Management measure success against the revenue quota target. Succeed and the reward is achieving your on-target earnings. Overachieve and you may enjoy accelerators that pay out more for the same revenue closed.
A successful company nurtures engaged, driven, motivated and determined people to succeed. Their plans need to encourage the right type of behaviour to maintain long term success.
Check if your plans are causing a behaviour that creates internal conflict
You are in business for only two reasons. To serve your existing clients or to secure new clients to serve. Commission and compensation plans are important tools supporting these objectives.
Driving behaviour using only a monetary reward system has an inherent flaw. It serves the individual’s need and values. The behaviour it drives is not always aligned with your business and client interests.
Monetary reward systems drive short term behaviour within a function. This itself can be the cause for conflict with another function. Often sales win the day because they bring in the cash. Hidden tensions build within the business creating further conflict between functions. These tensions and conflicts open the door to inefficiencies impacting your client experience. Client experiences are powerful drivers. They underpin your ability to unleash your business’s sales and revenue growth potential.
How can you manage monetary plans and avoid them creating conflict?
You align your monetary plans and functions with your sales value chain. We all feel a responsibility for breaks and failures within our functions. These are often caused or exasperated by other breaks and failures. So, the events continue which is the reason we call it a chain.
At any point where the value is not added or a chain breaks, it impacts how your audience perceives you. They do not see your full potential, which only serves your competition.
Your business will perform at its best if you focus all functions on your sales value chain. This is because a value chain places your client centre stage. You can find out more information about a sales value chain using this link. (Sales Value Chain)
The Law of Business Success is no different to the law of nature.
BEHIND EVERY BIT OF GOOD FORTUNE LIE THE CAUSES THAT WE OURSELVES AT SOME POINT SET IN MOTION
BEHIND AN ILL-FORTUNE, WE WILL FIND THE ENERGY WE, OURSELVES, HAVE GENERATED
Conflicts are often a result of payment plans not aligned with the sales value chain. If all functions are not aligning with the sales value chain conflict will occur.
Align everyone with the sales value chain and everyone will be using the same framework. All will see your clients are centre stage. Internal functions become better aligned. They stop coming up with conflicting ideas why a failure occurred or what to do to redress it.
To align your monetary plans with your sales value chain consider a different approach. Consider implementing an employee engagement program across your whole business. Within it, you can deploy your commission and compensation plans.
What is an Employee Engagement Plan?
Employee engagement is a relationship between an organization and its employees. An “engaged employee” is completely absorbed by and enthusiastic about their work. They take positive action to further the organization’s reputation and interests. (Wikipedia)
Kevin Kruse from Forbes.com says the definition of employee engagement is;
In business, strengthening your value chain must be your most important task. You need to make this the central focus of your employee engagement program.
Every link in a value chain must always add value. Everyone’s role is to add significant and needed value on time and to be effective. It does not matter if you are in sales or not. This applies to everyone whether you are interacting with internal or external audiences.
Trust within a business develops when everyone focusses on supporting one another. Trust is a feeling, not a rational experience. Feeling trust is when you sense that another person or organisation is authentic. They focus on more than their own self-gain. With trust comes a sense of value beyond the value equated to money. The most respected brands understand this simple truth.
Commission plans that are not anchored in some way to the sales value chain are self-gain focused. So many of these plans create short term behaviour. They contribute to and exasperate downstream challenges in the value chain. These challenges if left unchecked can become real problems, even psychotic problems. Psychotic problems will stifle and hurt your business. They may even threaten your business’s very survival.
Focus on your ultimate competitive advantage
You prove your ultimate competitive advantage, what I call your X-Factor by what you do. Why you do it is a belief. Your value chain is how you do it, the actions you take to realise that belief. What you do is the result of those actions. When all three are in balance, trust emerges, and value follows. You can find out more information about the X-Factor using this link. (X-Factor)
A team player works well with the rest of their colleagues within a value chain. They are outcome focused and understand how their actions benefit the ultimate client. They receive value, add more value and pass on to the next link in the chain. The more engaged an employee is the more effort they invest. Engaged employees lead to better business outcomes. They also have a better sense of well-being.
In 2016 The Society for Human Resource Management (SHRM) ran a survey. Its goal was to highlight the importance of aligning recognition and the organisation’s core values.
“The majority confirmed their employee recognition programs had positive impacts on employee engagement. Also, workplace culture, retention and employee happiness. Another key finding. More organizations are tying employee recognition to their core values with good results.”
Your sales value chain and X-Factor needs to incorporate your organisation’s core values.
Okay, I am onboard, what next?
An effective employee engagement plan includes the following parts:
- Commission and compensation
- Skills Development
You already have your commission and compensation plans, keep them with one amendment. Introduce a weighting linked to your rewards program. An employee’s reward status aligns with commission or compensation payments they received. The devil will be in the detail, but this is the principle. This will encourage staff to add value and strengthen your sales value chain and X-Factor.
Take care not to link your rewards and recognition programs, keep them separate. Linking them makes recognition hierarchical. Managers can also only use the reward options provided to them to recognise success. Giving someone a £10 voucher could be underwhelming. Visibility of their contribution from their manager or peers is often more important.
Keeping them separate allows you to assign a budget for your reward program. Also, the number of peer recognitions shared within your business can be infinite.
I would recommend considering 1% of your salary budget to invest in your reward program. Do not limit the program to sales or front-line sales supporting functions. Your whole business is now focused on strengthening the value chain and X-Factor.
Managers have greater visibility of how their teams are performing. Also, how they perform within the business. Peer recognition systems minimise the impact caused by people not pulling their weight. Managers can use it at their discretion managing the reward program. It also provides valuable insights into managing the more structured appraisal process.
There is some debate about whether to drop annual appraisals and engagement surveys. My personal view why this is being debated is because those companies have not found a way to make them work. You should be talking and listening to your teams all the time. Focusing on your sales value chain you now have a shared framework the whole business is working too. It is also human nature to take stock, to look back and see progress.
Securing the best talent and keeping it.
Improving employee morale will impact your productivity and reduce conflicts. Employers are looking to reduce their recruitment costs. Employees are looking for companies that will invest in their professional skills development. Success is dependent upon how competitive you remain in increasing competitive labour markets. Employees know they need to sharpen their human skills to remain competitive. Their success is how well they adapt to the increased use of automation in business. The application of artificial intelligence (AI) and robotics is changing the workplace. 48% of HR professionals cited training as their most effective recruiting tool. SHRM’s 2017 Employee Benefits Report
Hiring the right type of people for your business is both time-consuming and expensive. If you invest in their personal development, you will attract the right type of talent. The development needs to prepare them for the future. It needs to strengthen its human touch.
Including skills development within your employee engagement plan positions you for the future. Programs like the Conversational Solution Sales Program prepares you for future challenges. According to Better Buys survey, employees with access to professional development are 15 per cent more engaged in their jobs. This leads to a 34 per cent higher retention rate. Investing in these skills will reduce internal conflicts. These skills will improve your team engagement to better serve your clients. Strengthening the human touch will position you to survive the rise of automation. The World Economic Forum.
Pulling it all together
An employee engagement program focusses everyone’s attention on serving your clients. Incorporate your existing commission and compensation plans into the employee engagement program. Link the plans to your company-wide reward program. Invest in your employee skills development to prepare them to thrive with the rise of automation.
Doing so you will develop the culture and discipline across the whole business. The whole business will be adding value and strengthening your sales value chain.
Do this and you will see a significant drop in the number of internal conflicts and escalations. Sales and support teams will work better with one another. A common approach to better serving your clients is now centre stage. Your business will also be better prepared, primed and positioned. It now can unleash its full sales and revenue growth potential.
About the Author
Treve Wearne is the founder of Nazca Services Limited. Treve supports businesses and sales teams positioning themselves and increasing sales revenues. Improving sales forecasts, talent development and retention in the most challenging business environments.