MOTIVATION, INCENTIVES & COMPENSATION
Pay for Performance
Trends come. Trends go. Anyone remember the hula hoop? But here's one that makes more sense than most – at least to the professional sales community.
Called customer-centric selling, this overall client approach to sales is making waves. Big waves. Yet compensation structures are not keeping pace. In fact, much of current comp structure is antithetical to a customer focus. "Companies need to rethink their metrics, because most are measuring – and rewarding – the wrong things," says Ernan Roman, author of Voice-of-the-Customer Marketing: A Revolutionary Five-Step Process to Create Customers Who Care, Spend, and Stay (McGraw-Hill, 2010).
The plus of customer-centricity is, of course, that when a customer trusts his or her rep – and by extension the rep's company – that can cut through the need for RFPs, competitive bidding, and a host of time-consuming and profit-slashing steps. This is why every business wants to be customer-centric, but getting there takes lots of work. And that requires rethinking the comp plan. When you look at most comp plans, closing deals and moving a prospect through the funnel are rewarded. Once the purchase order is signed, customers are forgotten, at least in terms of calculating sales compensation.
Consultant Lior Arussy says that he urges companies to take radical steps toward revamping sales compensation if they want customer-centricity to prevail: "What if, for instance, 40 percent of a rep's commission hinged on receiving a letter from the customer attesting that in every respect, every promise made by the rep was kept? Do that, and it tells the reps you really value customer experience." Use pay to redirect your reps' focus toward relationship building with customers, and that is what they will do.
But to veteran sales managers, revising compensation plans conjures up visions of long hours spent laboring with spreadsheets, and somehow, no matter how painstaking the input, there are always errors. The result: grumpy sales reps who don't trust their paychecks and often spend hours going over the calculations just to make sure they are getting every dime they are owed.
Enter a new generation of automated compensation software – Xactly is a market leader – whose goal is to make compensation calculation something that happens in the background, typically by importing data already reported to salesforce.com. "We used to have a frenzy of activity working on spreadsheets at quarter end," says Tom Kahl, senior vice president of corporate sales at online training company GlobalEnglish in Brisbane, CA.
With automated tools in place, there is no need to break a sweat. And it gets better: The same tools unlock the potential for huge changes in rep behavior. In the spreadsheet era, any suggested alteration was likely greeted with resistance, because somebody had to write new algorithms, test them, then track the data. Now, if a sales manager can envision a goal, the goal being a new set of desired behaviors, reworking compensation isn't much harder than stating the goals, says Lars Nilsson, vice president of field operations at IT security company ArcSight.
The beauty of good software in shaping sales rep behavior? "With just a glance at the individual dashboard, a rep sees what he or she needs to do to get to the next incentive level," says Kahl.
Managers, too, can see at a fast glance what reps are doing right (or not), and they can implement new incentives on the fly. The delay between action and reporting gets cut to near nil, and that means managers always have the information needed to redirect the sales team where required. Kahl added that right now GlobalEnglish is working to develop measures of customer satisfaction, and the plan is to build them into the compensation system.
As for bringing all this into sharp focus, Mike Schultz, president of consulting firm Rain Group in Framingham, MA, offers this succinct advice about using comp plans to transform culture: "Make bonuses, commission, and success recognition based on customer retention and repeat business. Make it less on closing the deal and more on keeping the customer loyal and getting the next five deals."
Putting It All Together
Before automating sales rep compensation, GlobalEnglish's Tom Kahl recalls many hours spent massaging spreadsheets. He says the company had two staffers working full-time on comp. Now, however, he says "it is one quarter of one person's time, and we have much higher accuracy."
Kahl's automation tool of choice? Xactly, a tool set that neatly integrates into salesforce.com. "Our reps don't even know we are using Xactly. They think it's another tab in Salesforce."
With automated compensation-data collection, info is entered into Salesforce and swept up by Xactly – no need to get involved. That is how so much time is saved, says Tom Weingarten, CEO of San Francisco-based Visage Mobile.
As for implementing Xactly, it happens in a matter of fast days. Ease of start up is an Xactly cornerstone. "That helped sell us on it," says Lars Nilsson, vice president of field operations at IT security company ArcSight. Implementation took two weeks, and testing added two months, but when all was done, the system worked precisely to plan, says Nilsson.
– Robert McGarvey
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