The new sales compensation program has been researched, cost modeled, and is ready for roll out. So what’s the process? Send out an email describing the new plan and consider it done? Cross your fingers that sales managers will answers questions for their reps?
Don’t assume that because the people who designed the new plan understand it, that anyone else will. Real understanding takes days, weeks, or sometimes months. Put yourself in the shoes of the sales organization, concerned with their livelihood and any possible disruption, and develop your change plan to drive the strategy with the sales team in mind. When making your next change, consider the following six steps:
- Start strong. Conduct your due diligence to make sure the program is bullet-proof and ready to go.
- Craft the change story. Be honest about the reasons for the change, and develop a clear message around the C-level goals.
- See the organization’s view. Expect some resistance, and identify who those resisters might be so you can get them on board.
- Get the change forecast. Know your organization’s readiness for the change and your team’s resolve to see it through.
- Leverage the learning modes. Use multiple methods, including those that serve visual, audio, and other learning types to communicate with the organization.
- Follow the process. Begin communication early and follow your approach until well after introduction.
On Day One, announce the new plan with strategic themes and reinforce at the team level. Make the plan announcement within the context of the overall sales strategy. This is the first formal communication of the change story. Translate the story to the team through sales management in concert with the strategic announcement. Sales management should then work with the team in break-out groups that get into the details of the program, answer questions, and make sure that each member of the organization understands the new program.
In the first 14 days following the announcement, open the communications channels. To support the announcement, open up your support channels to capture the inevitable inbound questions and manage the flow of communications. These vehicles typically include an inbound voice hotline, a dedicated e-mail account, a company-operated blog, and social media presence. While some of these vehicles may seem non-traditional, it’s not uncommon for the sales organization to establish its own web and social media presence in response to a major change. It’s usually better for the company to move proactively in this direction than to reactively defend.
Thirty days after the announcement, test for understanding. No matter how well accepted the plan is during the announcement, don’t assume the whole organization understands it. Following the announcement, managers should work on a schedule to reach out to reps and confirm their understanding of the plan and their objectives.
Sixty days after the announcement, test for behavioral change. The first sign that the plan is beginning to work is a pattern of behaviors that are consistent with the objectives of the program. Test for these changes through direct coaching and observation by sales managers and through performance measurement through vehicles like the CRM system that track activities and steps in the sales process.
At the 90-day point, test for performance results under the new plan. Depending upon the length of the sales cycle, results may begin to show during the initial months or after the first quarter. With many implementations, the sales organization may actually experience a dip in performance after the introduction as it adjusts from any initial distractions and begins a new, consistent rhythm.
When making the change to your program, start early with socialization, craft the right story for your change environment, and stay sensitive to the organization while you work through your multi-mode communications process.
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Photo Credit: Mathyas Kurmann
Sales organizations live in zero overhead growth environments, and productivity is something that is continuously worked on. If you want to grant your organization a three percent merit pay increase, you have to find it within the organization. So if you’re not getting three percent more productive, you’re underwater.
Sales productivity is part time allocation (how much time reps have to interact with customers) and part effectiveness with that time (workload, sales process duration, and close rates). We call this combination sales capacity.
Sales organizations interested in increasing the productivity of their teams should focus on these two areas:
- Time. Our studies have shown that, on average, sales resources spend 44% of their time focused on selling activities. In other words, over 50% of their time is spent on non-selling or non-revenue generating activities (such as travel, service, administration, and internal meetings). In this 24/7 fully-accessible world, sales roles are continually asked to do more tasks, beyond the job description of selling. This work is important, but not as critical to the business as meeting with customers and selling the products or services.
Sales leaders can increase the amount of time their sales people have by:
- Measuring so you can manage. Track and catalog how much time reps spend on selling versus non-selling activities. Tools are available to sample the organization (kind of like a Fitbit for the sales organization).
- Understanding the job role. What is the optimal objective of that job? What are the value added and non-value activities for the company and for the job?
- Decontaminating the sales roles. Move the right activities to the right roles. For example, shift transactional activities to lower cost roles. Allocate the more strategic activities to the more strategic sales roles. Sales organizations can then calculate the ROI from shifting administrative work to lower cost resources and allowing sales people to hunt. Decontaminating sales roles can have a significant impact on productivity. For example, for an organization with $2B of revenue and 500 quota bearing reps that spends only 50% of its time selling, adding 5% more selling time at only 20% of the current revenue per hour yields an additional $40M in sales capacity.
- Effectiveness. The second part of sales capacity is how effective sales people are with the time they have. Sales leaders can improve the effectiveness of their sales people by measuring and managing:
- Workload. How much time does it takes a rep, in hours per week, to win a deal? What percent of his time each week does he spend on a specific deal?
- Duration. Length of time it takes (weeks or months) to close a deal. How quickly can a rep move a client through the sales process?
- Close Rates. How many deals in the pipeline does it takes to win one deal?
Sales effectiveness can be improved by qualifying deals according to more rigorous criteria. We all want a big pipeline because it feels safe. But it takes a lot of time to manage all those opportunities, and it is deceptive to yourself and the organization. Sales effectiveness can also be improved by getting deals out of the pipeline sooner. Flush out the opportunities that have a low chance of making it right away.
When I was a kid I was not afraid to be creative. Most of us, as kids, are inherently creative. I drew all the time and I drew everything I saw. I took all the art classes I could, starting with Saturday morning instruction from a television cartoonist and later progressing to regular classes at a local art museum, sitting among students who were two to three times my age. So, I grew up, graduated from the University of the Arts, and entered a professional world of New York design at a top branding agency.
After earning my MBA, I played down my design background. As adults, creativity doesn’t fit as comfortably into our world, especially in sales. But over the years, working with leading sales organizations around the world, I noticed an interesting pattern: sales demands creativity and innovation. I realized – even in the analytical world of sales forecasts and quotas – I relied on the lessons I had learned in art school to push my thinking and come up with better answers. It includes listening, understanding the customer, gaining new insight, getting beyond our standard offer, creating divergent ideas, pushing the customer’s thinking, and coming up with an answer that leads the customer ahead rather than simply meeting a requirement. Without creative thinking, sales is reduced to the role of order takers and replicators of the competition.
Sales creativity is not an elusive quality. It’s not for the few with natural talent – we all have it. It’s not only for sales people working in companies labeled by the business press as innovative. It’s not about eureka moments. Sales creativity follows a clear approach to get results.
I recently spoke to Tracy Tolbert, executive vice president of global sales at Xerox Services. For him, creativity is an essential part of the business and creativity is an essential characteristic of successful reps. “In almost every case, our most successful sellers are the most creative. We occasionally get a salesperson who’s in the right place at the right time, and it’s the perfect storm and they get a big deal, and that’s great. But those who deliver it quarter after quarter, year after year, are the creative thinkers, who put themselves in the client situation and figure out how to make the environment better. And by the way, that’s true for salespeople who are hunters, who are out there trying to find new clients, and it’s also true for our account executives who are managing existing customers. It’s the same kind of thinkers that are successful year after year.”
Innovation has to be a priority for the organization, says Tolbert, and not just the initiative-of-the-day. “You have to be relentless. You can’t just write about it in some newsletter one month saying, ‘Okay, well, make sure everybody’s got it.’ They have to get sick of hearing it from you, because then it becomes part of what they’re naturally thinking. You have to push, push, push and constantly expose your organization to creativity and the demand for innovation, or they just won’t pay attention.”
The consistent delivery of innovative ideas has paid off for Tolbert’s sales organization. For example, the CEO of a current customer came to one of Tolbert’s senior sales executives and told him about a financial problem they had. He essentially asked that executive to create solutions for his company’s budget crisis. “This sales executive just got directions from the CEO to take tens of millions of dollars of cost out of the organization,” says Tolbert. “He came to us and asked, ‘Hey how can you help me do this? Not in reducing the price on the service you already deliver for me, but here’s the rest of my organization. How can you help me take the cost out?’ It’s because we have a great relationship with the CEO and have delivered creative solutions in the past. We wouldn’t even be talking to these guys if we were not delivering service to them perfectly on the other side of the business.
“In response to this challenge, we have to be creative. We have to say, ‘Yes, we can think of new ways to deliver for you.’ I think our customers see us as really, really good creative thinkers around complex solutions. And they believe it because we’ve demonstrated it to them, rather than just talked about innovation.”
For Xerox, number 127 on last year’s Fortune 500 list, creativity belongs in sales. Where does it fit in your sales organization?
Mark Donnolo is managing partner of SalesGlobe and author of What Your CEO Needs to Know About Sales Compensation and The Innovative Sale.
Last week I spoke to a salesperson who was visibly irritated. She had returned from a quota-setting meeting and learned her quota, most likely, would be raised by about eight percent next year. She actually called it a “punishment” for her high performance in 2013. And while she had been invited – as a high performer – to participate in the quota setting process for 2014, she didn’t feel her voice had been heard. The market had changed in her territory, and an eight percent increase didn’t accurately reflect the potential, she said.
It’s a common problem, and of course no salesperson would be a fan of their quota increase. But quotas are important – they are the linchpin between the sales strategy and the sales compensation plan – and they always seem to be reduced to just the number. While the sales compensation process demands months, quota setting is often given one day.
Beyond the number, effective quotas begin with an effective thought process. Let’s take a look at the pros and cons of four common quota-setting methodologies:
1. Flat quotas give everybody the same number; for example, a $3 million annual quota. The assumption is that all opportunities and resources are equal. This type of quota works fine for a startup or when entering a new market, like a foreign country. Flat quotas do not work well when territories are assigned because inequities between market potential start to arise.
2. Historic quotas are the most common. The assumption here is that history predicts the future. But, as we saw with the salesperson I spoke to, history also tends to give out performance penalties. Had a really great year? Fantastic. Don’t forget we’re going to raise your quota 10 percent, so get ready for your really great increase. Salespeople could deliberately reach a certain point in their compensation plan where they’re comfortable with the income, and then stop so they don’t drive next year’s quota too high.
Historic quotas are fairly good for early stage markets, or for markets with high potential. But, it’s important to protect salespeople in particularly competitive or saturated markets.
3. Market opportunity quotas use specific information to understand the market. You can combine this with a historic process and use market opportunities as a modifier, or you can use an approach like this completely on its own.
One of the best uses of this method I’ve seen was in a B2B office products company. They realized they could predict a customer’s office product expenses down to $1,000 per white-collar worker, per year. For example, in the case of a bank, the bank would spend $1,000 per person on office supplies including office furniture, office machines, etc., per year. If the office supply company found out a bank had 100 employees, it could set a quota for $100,000 for that account, roughly. From this, the company could also figure out quotas by industry, through percentage of white collar. For instance, we know that the legal segment is going to have a higher percentage of white collar than manufacturing, for example, further setting quotas.
4. Account opportunity driven quotas are very easy to understand. They consider variations in the market: how are territories different from each other in terms of market share or in terms of growth? They also look at pipeline opportunities and predictors to be able to create a picture of what the future might look like. It’s a very granular approach, and very good if you have a moderate number of accounts that you can get information for, in addition to good pipeline and CRM information.
Successful sales organizations tend to use some combination of these methodologies. You can have both a bottom up and a top down quota process. It’s important to emphasize that quotas go beyond the numbers – the process of how you get to that number is important.
Mark Donnolo is managing partner of SalesGlobe and author of What Your CEO Needs to Know About Sales Compensation and The Innovative Sale.