This may come as a surprise to some of you, but sales compensation doesn’t work as a motivator. Shocking! While there are certain circumstances in which compensation works, it usually doesn’t.
Audio:
Video:
Additional Resources:
- [Pillar Page] Increasing Sales Velocity
- [Blog] 5 Questions You Must Answer Before Creating An Effective Sales Compensation Program
- [Blog] The Most Common & Costly Mistake Made With Sales Compensation
Show Notes:
Does sales compensation work as a motivator for sales reps?
It depends on how you define work and motivator.
There’s some behavioral theory that says there is no such thing as an external motivator. Motivation can only come from within. But Doug would say that if something triggers an internal motivation, that would be distinction without difference, so he would toss away the behavioral argument.
In one of our blog posts about sales compensation, the post starts off with big letters - COMPENSATION DOES NOT MOTIVATE (with one exception). The one exception is when you are making less money than you need or when you’re lacking important things in life, but it doesn’t motivate you in the way you would want it to.
Compensation and sales compensation are two different things. Sales compensation is different because it’s a form of variable compensation where normal compensation is based on outcomes, results, contributions, activities, etc. Sales compensation falls into the structure of what gets measured gets done. This structure can be beautiful or it can be horrible. Your sales compensation plan is the single clearest signal to what you’re saying is important.
Does sales compensation motivate people to do the things that they should do that they don’t want to do? No, because if they were truly motivated by maximizing their compensation, then they would do whatever things they need to do to get there.
What tactics would you take other than using comp as your motivator? What are some specific things that you would do to motivate your sales team the right way?
Doug would map out and have a clearly articulated business process. (Yes, the answer to every episode of The RevOps Show.)
What’s the game that’s being played? If you want to motivate correctly, you have to clearly define what’s the game you’re playing. If the game is not clearly defined, what are you motivating to?
We use compensation to motivate the decision making process that people take to navigate decisions, actions, behaviors, and so on. If you show Doug an organization that has a sales comp plan, he’ll show you someone in management that’s complaining that the sales team or individuals on the team are gaming the plan. If gaming the plan is bad, then shame on you because it means the plan wasn’t designed correctly. Doug likes to create plans that the more you game them, the more we get the behaviors that we want. There’s also a management element to it. There’s intent beyond “we have fit criteria.” You need to manage not only whether you’re closing business, but if you’re closing the right type of business.
The more you use a comp plan, the more you find yourself frequently changing the plan. The more you change the plan, the more you create winners and losers through no fault of their own. That creates an awful lot of disruption.
Can you give an example?
This gets to the point of gamification. Doug was having a conversation with someone who had been hired by a very large company. Part of what he’s doing is working on some of the gamification elements for utilization and Doug gave him a piece of advice. Doug finds that most gamification is overly focused on the result because at the end of the day what we want is the result and measuring that is pretty easy. The two easiest things to measure are the end result and the initial activity.
What you want to do is identify the behavior that will lead to an outcome that has a causal relationship to the result that you want. The way we do it is that we track meaningful conversations. For us, a meaningful conversation is when we learn something material about the prospect that will enable us to better personalize, contextualize, and orchestrate future activities to increase the probability of success. When you have a sales comp program, you’re comped on closing business and hitting certain numbers. What happens is people want to go as fast as they can and are incentivized to go for speed over effectiveness/velocity.
One common mistake is that reps will go too far, too fast, especially early. Why? In the earliest stages of a sale, when things are least clear, they’re at their lowest probability so it’s a higher risk of time. They go fast early and then play a whole bunch of catch up late. What happens there is win rates go down because you end up spending more time in the sale.
Going back to our meaningful conversations, we have a scorecard that defines whether something is a valuable opportunity. Early on in our system the rep is thinking about assessment to ensure that the rep isn’t bringing in low value deals.
Doug thinks the lack of clarity in the comp plan is 9 times out of 10 symptomatic of a lack of clarity somewhere earlier. When he says early he means early in the business process.
What are the other things you would do organizationally? What is your sales compensation philosophy? Everyone’s point of view on compensation is either a reward or a punishment. Where does compensation fit in the overall schema of the behaviors of the game you’re trying to play? Too often we rely too much on compensation and that’s where it screws up.
What are the components of the result that you’re trying to achieve? For example, is it the larger the deal, the better? Most people will say yes, but I’m going to ask the question, is that always true?
Realize, if you don’t take a little bit of sophistication into your sales composition, any good sales rep is going to get to the point where one of two things will happen. They’re either going to make more money than they ever thought, so they’re at a comfort level, or they want to make more.
Jess’s Takeaways:
- What’s the game you’re playing?
- Don’t focus on outcomes, focus on what causes sales.
- How do you want to motivate your reps?
- Make sure there is sophistication in your sales comp plan.
Next Steps:
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Follow Jess, Doug & Imagine on socials for updates on the show or other insights:
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Doug Davidoff: Twitter - @dougdavidoff | LinkedIn
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Jess Cardenas: Twitter - @JessDCardenas | LinkedIn
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Imagine Business Development: Twitter - @DemandCreator | LinkedIn
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