Part 2: The Data – The POISON Known as “Commission”… and The Cure!

by May 11, 2020

Lets step back to the prior blog with how I exited that part… and the fundamental tenant that… every system is perfectly designed to deliver the results that it gets!

How did we get here?

A 2019 sales compensation survey by the Alexander Group delivered the following data… (my smart-alec comments are in italics)

  • 2018 as the time frame was a good year, 6% revenue growth on average by those that responded and they were expecting 6% growth in 2019
  • 66% of the companies added sales headcount in 2018 and 59% planned to add in 2019
  • 91% of the companies rated their 2018 comp plan as “acceptable”, YET…
    • 62% made mid-year changes (likely never in a positive direction).
    • 24% reported that their comp plans were not aligned with the corporate business strategy (so WHAT were they aligned with?).
    • 13% of the sales force did not understand the comp plan.
    • 96% plan to make changes in their next year’s plan (just like every other year, plans to limit, cap and manipulate).
    • 44% plan to improve sales objective alignment with the business strategy (the rest really have no plans to improve).
    • 86% report that individual performance is the largest accountability metric (teamwork… what teamwork).
    • 87% will NOT use an MBO component in the plan.
    • 22% have pay caps in the plans.
    • 58% use a clawback to recover monies already paid (pay it out, take it back… that’s really motivating).
    • 63% had a mid-year quota change (rules of the game change mid-game.. more manipulation).
      62% of the companies do NOT have a profit measure in the comp plan (that shows just how much you care about corporate profit health).

That list above and every other metric that you can see in a revenue-driven, personal commission system is simply a methodology of MANIPULATION. A manipulation scheme that is created to drive sale people to corporate objectives that are only financial in nature. Once again, this is done from the belief that salespeople are only motivated by greed.

Now, granted there are some comp plans out there that try to include some feel-good things about client retention, new client growth, and general client satisfaction metrics. These are all great things, as long as the underpinnings of it all is not personal revenue billings vs quota (another manipulation game) that yields a “commission”. That last element is what will taint it all, every time.

These are the systems of old. Old thinking, that still exists in the new world. Old carrot and stick thinking of “motivation”. Old and broken! In this global world where decisions are made by groups scattered around the globe, it takes teamwork to co-create client value, and it does not happen when people are back pocket focused.

These complex comp plans require a massive amount of administration time. As I ask most sales leaders they consistently confirm that they spend at least 40% of their time forming, measuring, adjusting, and otherwise manipulating the plan. 40% of a leader’s time that could actually be spent leading and coaching the team. And sadly that last bullet is one of the reasons that most companies will NOT make a shift, because it would actually expose the lack of leadership and coaching. Really TOO bad!

Here, let me repeat, salespeople are NOT coin-operated, and greed is NOT a motivator! More in a bit about what IS.

An interesting perspective is noted by quality guru Edward Deming as he stated that employee incentives are NOT good motivators, other studies have concluded that individual incentives do NOT create an enduring commitment to any goal or action…

So what? In addition to all hiring, onboarding, and training costs what are the other impacts of a 35% turnover rate in your sales team?

Other studies give us some answers.

  • Each departure in medical equipment companies has an average revenue impact of 4 times the annual salesperson salary.
  • One SaaS company has a 21 month to profitability period for a salesperson AND they have a 50% turnover rate at 24 months. 3 months of profitability before turnover! There is nothing OK with that!
  • The comment from clients… “who is handling my account now?”, that you hear under this level of churn, does not create a positive image for the company.
  • There is NO capacity to provide advance, meaningful, significant training when there is barely time to handle the basic onboarding load.
  • Low morale and loyalty exist with colleagues dropping like flies everyone is actually in resume update mode.
  • Tough to hire the new team when you are seen as unstable or incapable of retaining talent and creating a career.

All of the above data is clear and quite accurate as I have had hundreds of conversations with sales leaders on this topic and most will confirm the data I have laid out. AND it is your choice to accept it or reject it. My suggestion, however, is that you clearly understand your own DATA. Don’t live with stories and old beliefs. Take the time needed to study your situation and determine your reality.

Our past does not have to dictate our future. Only if we choose not to learn from it will we be forced into duplicating it. The good news in all of this is that the entire situation is controllable and quite changeable. It takes leadership and coaching… not manipulation.

So for part 3 of this blog I will lay out how the ship can be righted, and how we can sail on through every storm we face, including the COVID-19 war.

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