Top 5 Incentive Plan Mistakes During Slow Sales Cycles

The “economic crisis” over the last seven-eight months has driven many intelligent and successful HR managers, Sales Directors and business owners to make unfortunate mistakes when it comes to their sales force compensation plans. Caution: No cookie-cutter comp structure…no one-size-fits-all magic formula for the perfect sales incentive program…a variety of factors must be assessed when creating the most effective compensation and incentive plans for each particular industry, sales force structure and cycle of business. So, our list of mistakes to avoid these days includes some exceptions and is intended to assist as you evaluate and plan for 4th quarter and 2010.

1. Making major (and knee-jerk) changes…. Not only does it create more uncertainty for your sales force (and they spend a bunch of time figuring out how to manipulate the new, complex system), it makes recruiting great talent harder when they discover you’re making major changes all the time. Instead, assess options such as temporarily lowering thresholds or adding a team-based component to recharge the sales force.

Exception: Your incentive plan was already in need of an overhaul and an evaluation shows that it will need to change significantly even when the economy is strong and business is hopping.

2. Slashing the sales incentive (because it’s a major expense item…) Sadly, we’ve seen this mistake more frequently in 2009 as senior executives feel the media pressure from the extreme examples of executive rewards gone awry and CFOs/ COOs are squeezing the expenses to survive through the downturn.

Instead, freezing fixed salary increases and increasing recognition and reward is the effective way to counteract fear and inspire people to focus on productivity.

3. Letting the incentives be the “lead story” in your communications. Have you been doing a lot of explaining, rationalizing, clarifying, and even apologizing for lower incentive payouts due to decreased sales results – in writing and during sales meetings? Put it on pause! Shhh….can you hear them now? Yes, it’s your loyal customers saying “I’m over here – do you still love me?” And your competitors are quietly getting appointments with them. And your customer service support team is feeling neglected and unappreciated too. Seriously – stop the unnecessary “negotiating” with your sales force and instead, engage them as you make extraordinary service delivery with existing customers a primary topic of conversation.


4. Discounting the proven power of non-cash rewards/recognition
Instead of cutting back on recognition and the “fun stuff”, PLEASE do more of it! A nicely packaged and presented gift basket or gift cards creates more emotion (for the receiver AND their peers watching) than cash and shows more appreciation than the $26.50 you might have spent. Regardless of what people SAY they want (just give us the cash), studies prove over and over that non-cash recognition is a powerful motivator and boosts morale. And keep in mind, with products and services deeply discounted at retail, as they have been for several months, gift card recipients enjoy even more value.
Examples: A paid day off; gift cards that are personal (what the associate and their family just love); balloons, confetti and a serenade for recognition; a team BBQ or night out for a milestone achieved.

5. Paying for activities/behaviors vs bottom-line results. Serious faces, wrinkled brows, “resigning” mindsets…. If your environment turns into an intense “all hands on deck”, this is what your team will experience and see, in most cases. And too often, it results in either paralysis (“The business just isn’t out there right now) OR a whole bunch of activity that perhaps isn’t so smart (“l’ll just blitz the market and make a ton of prospecting calls to report”) You want to keep those top performers; you want to motivate the whole team to get out there and follow that sales process. Sure! Changing the comp plan to pay cash for activities violates one of our “golden rules” and yet in times like these, it can be effective on a temporary basis. Proceed with caution and:
· Define very specific sales process step(s) or skills/behavior(s) you know will bear much fruit with an intense focus. Examples: product presentations to a target market; qualifying leads; specific kinds of outbound calls
· Plan for a ~60-90 day focus that includes both a clear picture of what success will look like (demonstrate it) and a training/coaching component. Use the temporary focus time to really invest in your team’s skill development.
· Do a robust job of de-briefing – create a culture where it’s expected and frequent. Drawing out what specifically worked, WHY it worked, what didn’t work, what would be done differently next time, etc. is a great learning opportunity for the organization and keeps the sales force moving, engaged and learning.

Common themes:

• Whether business is booming or sales are plummeting….your sales and service associates are always most productive when they feel respected for their work and recognized for their efforts and contributions. You’ll only get through the economic downturn with great PEOPLE on your team – and when we reach the other side, you’ll need these great people on your team poised to hit the ground running.
• Tweaking the comp and incentive plans is inevitable and appropriate this year. Slashing and burning is risky and the negative consequences are usually very challenging to recover from.
• Do not stray from the golden rule – pay (cash) for results, not for activities or behaviors. Exception: Short-term rewards and recognition for specific activities or skills demonstrated can work.

Hevel +Co E-News

Incent or Lead? Do Both for Sustainable Results

I've developed and managed incentive plans on and off for more than 15 years and if I can apply only one learning to my work with clients, it's this - employees focus on the activities, skills and behaviors they're frequently assessed and coached to focus on. A common issue I've seen over the years is the laziness (or lack of training or accountability) of managers when it comes to their primary function - leading!

Incentive plans are often relied on to be the driver of most employee motivation and growth. Quickly, this approach leads to unintended consequences - two of which are quite common:

1. The middle ~80% of performers, an important and large set of the sales and service force, are "lost" in the shuffle. Many of these middle performers have high potential for growth and performance improvement, yet lack training, coaching, experience or something other than (or in addition to) money to get on a continuous improvement track (see this issue's article below on the power of scorecards).

1. Additional incentives become the expected response to improvement needed in any area of performance. When a particular product or service is lagging in sales, or an activity is not being done, the alternative to managing performance/leading is "hey, let's just double the commission or add it to the incentive plan". Focusing on incentives (especially cash commissions) every time a particular activity needs more or different focus very often starts the organization down a slippery slope hard to climb back up without a major overhaul to the compensation and incentive structure at some point.
   

The Right Mix of Cash and Non-Cash Incentives

I'm frequently asked about this. Over the years, I've seen a variety of non-cash rewards achieve their objectives in one situation and fail miserably in others. No one wants to hear "it depends on..." yet there truly are several key factors to consider. What IS finally clear? After years of being "sold" on non-cash rewards by the companies that make their profit on them, and the corresponding skepticism and mixed results, the PhDs have done their research and it's compelling. What sales employees say they want (cash) is quite different than what ultimately motivates and produces greater improvement in individual results - awards they wouldn't buy for themselves, recognition, respect, development opportunities, etc.

If you're interested in understanding perceptions of the value of tangible non-monetary incentives and a study that showed results of that higher value perception, go to http://www.salesdriver.com and see the white paper/research done by Dr. Scott Jeffreys.

In my experience, a few of the factors to consider are:

• What percentage of the specific job function is focused on purely proactive sales activities (or direct collection of revenue, such as the role of a collector)? The higher the percentage, the greater the percentage of incentive dollars paid should be in the form of cash.
• How much opportunity is there in your existing pay-for-performance plan to recognize outstanding performance and stroke the egos of your top performers?
• Are the job function responsibilities too broad in scope to make the variable portion of compensation at least 10%?
  

Would an assessment of your current incentive plans be a worthwhile
investment? Let us help! An initial consultation, free of charge, may very
well identify some priorities for you to consider.

Best wishes for a wonderful holiday season!

To explore your sales & service performance improvement opportunities further, contact us at 614-882-2315 or via e-mail at dhevel@hevelandco.com. Visit us at www.hevelandco.com to subscribe to future newsletters.

It Starts With Role Definition...And The Scorecard

When designing incentive plans, I can't stress enough the power of great job design, clear communication about areas of focus, and an effective scorecard from which to assess performance and plan for future activities. A couple of my clients do these things extremely well in conjunction with maximizing the outcomes of their incentive plans and it's paying off. The
golden nuggets?

1. Evaluate your prospecting, customer expansion and retention processes within the sales and service function, and look for opportunities to segment both the customer types and priority contributions necessary from each job function. Example: One of my clients, a business-to-business sales function of a consumer goods producer, was experiencing employee turnover and stagnant sales from existing clients. They had beefed up their commission structure, yet over six months saw no increase in overall business. After assessing their processes and job functions, we segmented the functions and responsibilities, slightly changed the organizational structure, and established key activity measures for the specific functions. They had a record-breaking sales year and productivity per employee went up on all levels. And, they paid out slightly LESS in incentive dollars! (My client ultimately decided to award the unused incentive dollars budgeted to payout supplemental bonuses.)
2. A scorecard for each individual job function must coincide with the presentation of the incentive plan. A clear picture of the key result categories, assigned weighting for those categories, and specific measures (1 - 3 max) under each establishes the foundation for understanding what the base pay is earned for and for action planning and future performance assessments.
3. Quarterly (at least) performance assessment conversations, 1-on-1 with each employee, using the scorecard updates and activity plan review as a basis, keep the team focused on what their total compensation is based on. When productive conversation is about overall performance, activities necessary to continue or improve it, and developmental coaching to support it, the incentive dollars simply become icing on the cake or a carrot dangling out there as an opportunity.
   

Of course, the entire incentive package (including pay-for-performance, special rewards and recognition programs) must align with the scorecard in many ways. Not every component of the scorecard however, needs to be paid an incentive on when you do steps 1, 2 and 3 effectively.

Diahn Hevel is the Founder of Hevel +Co. You may reach Diahn at
614-882-2315 or via email at dhevel@hevelandco.com.

Wishing the happiest of holidays to all of our clients and colleagues!

A proven rule-of-thumb for a sales contest reward: the incentive for meeting or exceeding the goal should be worth 3 to 5 percent of an employee's annual compensation. Ex: A program for a sales force whose annual compensation (base plus average commissions) is $40,000, the reward
for achieving the stretch goal should be valued at approximately $400 per quarter.

Tip: Approximately 85 percent of prize points redeemed from a reward catalog are for home and family items. Take advantage of this by leveraging the family and/or spouse to motivate the sales person. Include the family in the announcement of the program and send updates to the home. "Friendly" encouragement boosts interest and helps participants see that the benefits of the program are professional as well as personal.

Watch for our next issue in January, 2006.

Hevel +Co August 2005 Newsletter

Strategies for Sales & Service Performance Improvement

I know I drive my clients and prospects crazy sometimes when I answer their question with a few probing questions of my own. A mentor taught me how to do this well, using the "hmmm… tell me more about that" technique. In the end, clients really appreciate this approach (at least that’s what they tell me!). And, practicing what we at Hevel +Co preach, we’re able to recommend solutions that address the real, root opportunities for performance improvement.

It’s back-to-school and budget season. Our topic this quarter is timely. A popular reaction to a drop or stagnation in sales or service performance leads clients and prospects to call us with "We need [fill in the blank] training. Can you help us?" Ah yes……more/better training – the solution to all our problems (and often, the answer to manager’s excuses for team performance. That’s another topic for another day.).

Whether it’s a desire to scrap existing training for something new or add more training, there are scenarios where this improves performance. However, in many cases, training is NOT the fix which will have the most positive, sustainable impact.

Just one example: A client requested we do an assessment of their sales process and explore sales training programs to put the entire sales force through ‘asap’. Fast forward…..the underlying issues of their stagnant performance led us to recommend a redesign of the sales management job functions, sales management process, and coaching model.

Three months later, sales training for both the new hire, on-boarding phase and advanced phase was developed and implemented. And, the management team was re-organized to align with the change in competencies and skills required for success. Result? Capture rates went from an average of 36% to 42% and rising!

Yes, sometimes more/better training is the answer. (And we love to do it!) Stepping back a bit to assess the effectiveness of other critical components (such as the hiring process, performance management process, coaching process, or job design) will many times lead to solutions that present the most impactful and sustainable results.

A colleague of ours, Dawn Snyder, has literally hundreds of examples like this, from years of helping clients dramatically improve performance. Read on for her fundamental thoughts on this topic. Best wishes for a prosperous fall season!

To explore your sales & service performance improvement opportunities further, contact us at 614-882-2315 or via e-mail at dhevel@hevelandco.com. To learn more about Hevel +Co, go to www.hevelandco.blogspot.com.

Before You Spend Another Dime on Training…
By Dawn Snyder, PhD

It’s budget time again and you might be wondering: Is it time to invest in new or additional training programs? Before you invest in training, it’s important to consider the other dynamics that impact performance. Optimal performance occurs when training outcomes are in alignment with these other factors. So, before you decide that knowledge and skills need to be improved, ask these two important questions:

*Are the organizational systems and processes set up to support the performance you expect from your employees? Key organizational systems and processes include your performance management system, incentives, and coaching and reinforcement. If the skills learned in training are not understood or supported by the employee’s manager, the time and money you spent on training will be worthless. If you train X and reward Y, you’ll get the same result—training efforts are canceled out.

In today’s fast-paced business world, organizational systems don’t always evolve as quickly as performance requirements do. Before you target knowledge and skill improvements, take a look at the performance environment. A good first step? Take a look at the performance appraisal form and determine if it matches the company’s performance goals. One company, for example, included "teamwork" as a key competency on the appraisal form when, in reality, the sales reps were incented to work as individuals, sometimes in subtle competition with each other or other teams within their own company.

*Do your employees have the resources they need to do the job? Sometimes organizations ask performance of workers without providing the appropriate resources, or by providing resources that are not functional. (Of course, this is never done on purpose!) Consider the customer service representative who works through a snarl of legacy systems to answer routine questions from customers and is held accountable to call metrics that are time-based. Or the manager who lacks the technology to hold global team meetings without resorting to expensive and time-consuming travel.

Sometimes, maximizing resources by organizing them in such a way that they enhance performance and/or adding tools such as job aids or productivity tools is the most cost-effective (and foolproof) way to enhance performance.

The rule of thumb is to look to environmental causes and then resources before targeting training as a solution. By looking at the whole picture, you can choose interventions that make sense and get the most out of your training dollars.

Dawn Snyder is the CEO and Managing Principal of Dawn Snyder Associates, Inc., a virtual organization specializing in designing learning strategies, developing learning solutions, and evaluating and measuring the impact of courses and curricula. She can be reached at 614.766.5506 or by email at dawn@dawnsnyderassoc.com.

---

Learn more about how a web-based Performance Management system can help you improve your business results.

Register for a complimentary webinar on Tuesday, September 20 at 9:00a.m. EDT, hosted by Diahn Hevel of Hevel +Co and Phil Devendorf of Professional Development Services.

To register, e-mail Diahn at dhevel@hevelandco.com and we’ll send you the webinar overview and login information. Please forward this invitation to any HR or sales/service support managers you believe might have an interest in participating.

---

Thank you for subscribing to our e-newsletter! Watch for our next issue which will focus on effective incentive, reward and recognition programs.

Diahn Hevel is the Founder of Hevel +Co. You may reach Diahn at 614-882-2315 or via email at dhevel@hevelandco.com.

---

Introducing Hevel +Co
Experts In Strategies That Will Enhance Sales and Service Improvements

Formerly Hevel Consulting Group, we're now a group of experienced, independent professionals, working in partnership with clients to raise the bar on their sales and service functions. Our expanded capabilities enable us to work with companies in all phases of performance improvement, from assessment to recommendations to execution of programs.

By focusing on human touch-points, we help improve customer experiences, increase retention of those customers, and expand the client base. Our team collaborates with clients to uncover root causes and develop solutions that will have a positive and direct impact on their customer experience--and their bottom line. We coach sales and service managers; partner with HR, marketing and product executives; and work with other support functions to align our clients' business strategies with front-line delivery---and, most importantly, their customers.

Together, we can virtually transform any sales and service function--and bottom-line results--by:

• Implementing a disciplined, repeatable sales and service management process. Our clients learn how to establish weekly expectations, follow up on them and provide quality coaching and feedback to their employees. Behaviors and activities, as well as results, are debriefed with our process; expectations are then re-set and clarified.
• Creating results that steadily improve over time. A disciplined sales management system helps avoid roller coaster results cycles. Managers and sales/service employees will no longer need to be reactive.
• Teaching team members to continuously assess the effectiveness of their own activities and behaviors. We help create a learning environment where coaching for continuous improvement is expected and desired.
• Aligning recognition, rewards and general compensation to desired outcomes. Tangible, positive reinforcement drives the productive use of associates' time and talents.
  

Hevel + Co Provides Integrated, Specialized Services

Sales and service program development

• Sales programs that align marketing and product development with execution at the point of sale
• Service programs that bring our clients' brands to life with every customer interaction
• Internal marketing that integrates employee communications with sales and service strategies

Sales and service management process development

• Hiring and on-boarding processes
• Management process consultation--process and tool design
• Leadership coaching

Education

• Sales and service workshops
• Client relationship-building workshops
• Sales and service leadership workshops

Reward and recognition programs

• Incentive plans that drive the 'right' results
• Short-term campaigns that effectively integrate with longer-term business strategies
• Recognition strategies and programs
  

About Hevel +Co

Hevel +Co is a group of trusted and proven independent professionals who assess, advise and deliver quality sales and service programs. Our professionals are selected on for each project based on their expertise and experience.

Founder and principal Diahn Hevel has nearly 20 years' experience in sales and service leadership that includes senior executive responsibilities. Diahn's field management experience, combined with her track record in corporate staff support management, offers a vast and unique blend of insights and skills to help organizations achieve business objectives. Her ability to synthesize issues and ideas; create solutions that address performance gaps; establish and lead efficient, cross-functional teams; and leverage resources and relationships has helped a number of organizations drive process improvement and growth, including:

• Cheryl & Co (gourmet baked goods)
• Fifth Third Bank
• GB Home Equity
• Huntington National Bank
• Nationwide Advantage Mortgage Company
• Wells Fargo Home Mortgage

Thanks To Our Clients

I'd like to take a moment to say 'thanks' to all our clients and colleagues who have partnered with us over the past three years! We appreciate the opportunity to work with great clients, such as:

• Cheryl & Co. (gourmet baked goods)
• Fifth Third Bank
• GB Home Equity
• Huntington National Bank
• Nationwide Advantage Mortgage Company
• Wells Fargo Home Mortgage
  

Here's What Some Of Our Clients Are Saying About Us

"Diahn is more than a typical consultant. Her practical field experience, leadership background and consultative approach to moving our business forward, makes her an essential partner to Huntington Bank."

Scott Walker
SVP--National Sales Administration Manager
Huntington National Bank

"Diahn, thanks for all your help this year! We had a great year, and our business sales group led the way!"

Brent Kelly
SVP, Sales and Marketing
Cheryl & Co. (a 1800flowers.com company)

Watch For Our Quarterly E-Newsletter Starting August 2005

We'll provide relevant, concise and actionable information for anyone responsible for leading sales and service improvement. If you would like to subscribe to the newsletter and have it delivered to you via email, please visit http://www.hevelandco.com/ and subscribe using the form provided.

Diahn Hevel is the Founder and Principal of Hevel +Co.
She can be reached at 614-882-2315 or by email at dhevel@hevelandco.com.