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The missing ingredient in your sales plan? Another look at incentive compensation
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By Bill Weeks

You're confident that your products are innovative and competitive, your staff is well-trained and equipped, you are targeting the right markets, and you are paying your salespeople well. Certainly, the economy and the regulatory environment could be better, but they are out of your control. You had pretty complete information when you set your goals and you did your best to make them realistic. You've added a new sales contest, gone on the road to "pump up the troops," even accelerated some product development, and yet, despite all you have done, it looks like your goals were set too high again this year.
What gives?

To be sure, it would be a big assumption to pin the blame on any one factor, but there is one ingredient that few companies have adequately dealt with - incentive compensation for management and sales support. More often than not, these groups were placed on company compensation and benefit plans well divorced from any direct link to sales results. While those making the sale personally had a very clear message on what they were expected to do, the message for the balance of the sales team was muted at best. Oh yes, their managers may adjust their year-end incentive if sales are significantly higher or lower than expected, but does that really have an impact? As they are on the same plan as other employees of their level, management seldom pays lower incentives than what their peers are paid, and they do not have the flexibility to raise incentives much in a good sales year.

So, what motivation does your sales support group have to stay late to finish up an illustration, to do the extra work to finalize and promote a creative new sales concept, to go outside underwriting guidelines in an iffy situation, or to endanger a long-standing friendship by helping the company recruit a friend from another company? And why should your sales managers leave on a Sunday to save the company money, say no on a touchy budget issue, or keep pursuing that reluctant recruit? When their only incentive opportunity is a modest annual payment with minimal variation, the short answer is they have more incentive not to take a risk or go the extra mile than they have to do it. The payments are just too small, too infrequent, and too disconnected to have much impact on behavior.

Leslie Wilk Braksick, in her business bestseller Unlock Behavior, Unleash Profits, cites positive consequences (which include money, recognition, awards, and management feedback) as four times as powerful as antecedents (training, past events, goal statements, etc.) in motivating behavior. You've all encountered situations where management says one thing but the pay plan encourages or allows another type of behavior. For instance, you preach selling only good quality (persistent) business but you pay only for sales. Guess which driver of behavior wins? You can be confident that you will come a lot closer to your sales goals than to your persistency goals. Certainly buy-in to company goals, loyalty, and friendship have impact, but the power of direct monetary incentives is far and away the strongest motivator.

In my four years of designing sales compensation for Prudential Financial, I had the opportunity to work on several new sales initiatives and several reformations. While a few of these are now healthy youngsters, most did not survive the birthing or rebirthing process, or died as infants. Given our annual compensation plan review process, I was able to watch the success or failure of sales initiatives long after the initial plans were installed. There were two traits that separated the thriving from the barely surviving. First, those that thrived incorporated the same messages in their compensation as they sent in their daily management and recognition programs. All three elements - management's messages, the recognition plan, and the compensation plan - reinforced the same behavior. Second, the team that supported and managed the sales force also got very similar messages. They were paid and recognized on the same elements and with the same standards as the sales force. The only divergence was within the administrative support team and at the top of the organization, where the responsible executive was typically paid like other company executives.

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