April 16, 2012
Between my speaking and consulting, I have many opportunities to compare comp plans and the resulting corporate cultures they create. If you want to have a strong customer service culture, for example, you'll need to aim all compensation plans at achieving it. If you want to have a strong entrepreneurial gene in your, generously reward the risk takers.
It's sad, though, that in sales cultures, we get stuck in the Quota/Bonus pay out trap. By trap, I mean that most companies reward sales and management, based mostly on financial performance. It's easy for this to lead to a weak culture (what-have-you-done-lately) that overly rewards the people that are close to the money - and marginalizes those close to the real work.
Here are three comp plan innovations that ensure a strong sales cutlure:
1. The 50/50 - When you give a bonus to a sales person, structure it so she gets 50% for her self and then distributes the remaining 50% to a team mate (or several people) that was a top contributor to her success.
2. The Net Promoter Slice - When you strucutre annual bonus, leave a big slice (say, at least 25%) for a measurable non-revenue metric. In this case, if you want to have a strong customer focus, the Net Promoter Score is a great indicator of success. So tie comp to it, and watch behavior change.
3. The Company Bet - At Interface, compensation is driven in part by the company's sustainabiltiy performance. The company's Mission Zero initiative is companywide and everybody's expected (and comp'd) to contribute. Last year, Google changed compensation so that every single employee's annual bonus is impacted by the success of their social network, Google+. This certainly increased cooperation across the company, and made the company intiative every single person's business.
One of my consulting clients made a deep investment into sales force automation, which not only streamlined their business, but likely ensured a huge gain in customer performance. After begging sales staff to enter all order information into it for over a year, they made a tweak to the commission plan: Fail to enter all your required information into SFA, and you don't get paid on the deal! That fixed things very quickly, and despite the VP Sales fear's, no one quit the company over the change.
As you can see, there are several ways to shake up the carrot-and-stick to drive difference types of performance than...just making money for the company. By the way, Dan Pink's latest book Drive suggests that money isn't our only motivation - so take that into account.