April 16, 2012

Three compensation innovations that will change your culture

11_Money-Motivator
That which is compensated, is motivated.  Nothing more, nothing less.

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. 

Posted at 5:19 PM in Business Effectiveness  |  Permalink  |  Comments (5)  |  TrackBack (0)

Comments

Commentor

I am impressed with the effort you have so obviously put into this content. I am also impressed with your point of view on this topic, especially since you have made your points so clear.

Please keep going on with your great work.

Commentor

Yes, if done wrong, changing compensation can have bad morale results.

BUT

When you start a company, have a person in transition or are enjoying a spate of positive developments...that's when you can make the changes. You can also make these changes during the beginning of a recession cycle as morale is down anyway, but loyalty is high.

In the end, it's not about employee morale. The goal is to deliver an outstanding customer experience and value to the world. And if that takes compensation innovation, we'll need to experiment.

Commentor

it can also lead to a lot of bitterness and resentment in your employees,

Commentor

Really interesting and innovative ideas. I do want to point out that this needs to be handled VERY carefully. Most employees get understandably concerned when their paycheck gets leveraged for team building. And while it can certainly raise everyone's personal investment in the company, it can also lead to a lot of bitterness and resentment in your employees, especially if it is in an uncertain gamble that not everyone has confidence in (Hello Google +).

Commentor

Hi! Just a quick note to let you know that your blog has proven to be of great value to what I am working on right now. Thanks!


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