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The total experience: What Italian coffee and bonus plans have in common

What Italian coffee and bonus plans have in common

I had the pleasure of going to Italy recently, and one of my favorite activities was getting coffee at different cafes. I would go three times per day and began comparing coffee across different towns as I travelled. Sometimes, I would also build up the courage to practice a little Italian with the barista.

Luck vs. Skill – Which Matters Most in Sales?

Luck vs Skill

The book “Thinking Fast and Slow” by Daniel Kahneman makes a provocative claim – for the best CEOs, luck matters more than skill. And he backs it up with data. If the success of the most senior executive in your company is affected by luck more than skill, is it possible that your best salespeople are, as well? 

Game On: Six Guidelines to Designing Game-Play for your Sales Force

Six Guidelines to Designing Game-Play for your Sales Force

In my last blog, I mentioned “epic” (or, really, just large scale) games outside of the standard compensation plan that could motivate your sales force – games that could pit the entire sales force into a sweeping us-versus-them situation. While that sounds grand (like a summer blockbuster movie), game-play with your sales force does not always require sweeping scale or nationwide involvement.

Fact vs. Fiction: How to Address Urban Legends that Spread Through Your Sales Force

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Have any urban legends in your sales force?  You know, the ones such as “big territories can’t grow” and “I don’t have any sales opportunities left.”  These urban legends spread from salesperson to salesperson and, whether real or fiction, dictate sales force perceptions.  You need to be aware of these field perceptions, rectify the ones that need to be corrected and “mythbust” those that are fiction.  These impressions could drive your sales force’s satisfaction with their sales incentive plan, their quotas and, in extreme cases, their job.  

How Massive Multi-player Games Can Help Improve Your Sales Compensation Program

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A couple of months ago, I mentioned the excitement that surrounds March Madness and asked how we might be able to harness some of that excitement in our compensation plan.

When rewarding your sales force, is it acceptable to double count?

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I came across a calendar with inspirational quotes last week and read the following from Harry Truman:

“It is amazing what you can accomplish if you do not care who gets the credit.”

Is no incentive better than a small incentive?

Is no incentive better than a small incentive?

People are motivated by intrinsic incentives (internal to the individual) and extrinsic incentives. But can adding a small extrinsic incentive eliminate the intrinsic incentive and cause a negative result? Let me explain with a few examples.

Should you include discretionary pay in your bonus compensation program?

iStock 000020028269SmallDiscretionary payments have been around for some time, but they are often a late-design throw-in for many compensation programs.  Discretionary payments are fully dependent on the sales management’s choice, and are not on any schedule or based on pre-defined requirements.  Typically, these payments are made when a sales rep displays exceptional performance or the company hits a milestone.

Should you consider adding and/or continuing discretionary payments in your company’s bonus compensation program?  Let’s look at a few reasons in favor of adding discretionary pay:

• Field managers typically enjoy the freedom associated with discretionary pay.  Discretionary pay can help with a number of unique situations in the field, especially those too varied and numerous to build into a base compensation plan.

• With the amount of time it often takes to complete a sales cycle or for sales to hit the books, discretionary pay can be an excellent way to provide more timely rewards.

• If you already have a points program in place for contests, using those points for discretionary pay can be a logical next step.

There are really only two steps to follow to set up a discretionary payment program. Following these steps will help avoid program overdesign:

1. Set a discretionary budget.  I have seen estimates of 5% of the total bonus budget, or no more than $1,000 per sales rep per year.  Whichever level you choose, the budget should be a small portion of a rep’s total compensation because of its 100% reliance on manager perceptions.

2. Create some level-setting among the management team for distributing discretionary pay.  This can be done by providing examples and limits on payouts that individual reps can receive each quarter.  Of course, there is a tricky balance when adding restrictions if you want to keep it truly “discretionary.”

Hopefully, this is helpful if your company is considering discretionary payments.  What other advice would you add?

Lessons Monkeys Teach You about Sales Compensation

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I have been reading several books on the topic of behavioral economics in preparation for an upcoming conference presentation on behavioral economics and its relationship to sales compensation. I found many fascinating studies showing how humans respond to economic incentives in certain environments—results that may have parallels to your sales incentive program.

The topics and studies that most interest me are the ones validated not only with human studies but also primate studies.  When the primate studies show the same finding as the human finding, it shows that there are some elements to our behavior that are innate to our very being and cannot be explained by a local culture or any other phenomenon – it is in our DNA. 

Product Launch Not Going Well? Three Ideas to Consider Before Changing your Sales Compensation Plan

Product Launch

If your company launched a new product that has not lived up to expectations, chances are that the bonus plan has not lived up to the rep’s expectations, either.  What should you do, if anything?

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