Effective use of bonuses is difficult – keep your eye on the main objective
In Part 1, I suggested that bonuses might not be as good an idea as you think. When people want to do something for itself [the psychologists call this “Intrinsic Motivation”] it is a more powerful and long lasting motivator than doing something for a short term reward such as a bonus.
So what about Sales Teams and Investment Bankers?
These jobs attract people who are unusually motivated by money so there IS an argument for using bonuses to incentivise them. But making bonuses work across the whole team with sufficient impact for positive ROI, overall, is not easy. Why is this?
Three problems
1. Improving the performance of the Core group
We have Star performers, Core performers and Underperformers. The Stars will perform whatever, but the big question is –
‘How do I change behaviour in the Core [the average performers], or the Underperformers, effectively?’
2. Individual Motivation influences response to the compensation scheme
The Figure shows four key Motivators and different individuals [eg A vs B in a study by ZS Associates 1]. The size of each segment is dependent on the person concerned. The structure of the pie varies eg for babyboomers and millenials, singles and spouses. One person may be very money driven {A] the other may be relationship building and customer service motivated [B]
Finding a single compensation scheme that impacts everyone, effectively, is pretty much impossible.
3. Large Sales usually come from team effort not individual brilliance
In 2017, there are usually many people engaged in convincing multiple stakeholders in order to get the deal: so individual bonuses are not appropriate; it is not one person’s success. [See The New Strategic Selling 2 ]
Albrecht & Marley suggest some rules you can follow 1]
7 Key rules for bonus schemes
- Your scheme is flexible; individuals can pick the goal that works for them; not ‘one size fits all’.
- Fairness and transparency mean no one can get aggrieved; everyone knows what is happening.
- Base salaries are aligned, not dependent on when the person joined.
- You cannot just have a bonus scheme – you need to boost intrinsic motivation too, eg to retain staff.
- You need a good sales manager who coaches performance and builds skills mastery in the team.
- Have no more than 3 metrics in your plan – keep it simple and work on the major behaviours, only.
- Use interim milestones; don’t just appraise performance at long intervals.
New Technology
Top sales organisations now use ‘gamification’ to interest younger workers: the games have goals, rules, feedback and voluntary participation. They use Sales Person Management [SPM] software that tracks the key metrics of individual performance. If you can do these things – great – if not you may get better returns in other ways.
The main objective: is there a better way?
Your main objective is to increase sales profitability.
Sales personnel are just like other staff in needing career development and a sense of belonging. Poor staff retention because they moved to somewhere with a better compensation scheme is avoided by working on intrinsic motivation. Increasing Sales profitability may be more a question of looking radically at how you sell rather than tinkering with the bonus scheme. We look at this in Part 3.
For help with all of the above talk to Nick: nick@gholdenphish.com.
1. The Future of Sales Compensation: Albrecht & Marley; ZS Associates Inc [Kindle].
2. The New Strategic Selling: Miklar, Heiman and Tuleja; Millar Heiman/ Kogan Page.
Comments are closed.