q

What’s the right incentive scheme for my sales team?

November 25, 2009 in Uncategorized

Of all questions, this is the one that remains on the minds of sales leaders and executive teams.   It is often the cause of more debate and angst than any other question in a business.

People search for the golden answer, however their quest will not deliver a definitive one because it all depends on what you want to achieve.

The current wisdom is that while there are ‘best practice’ frameworks for creating the ideal sales compensation or incentive scheme, it is not a ‘one size fits all’ approach.

While Remuneration Surveys can provide some pointers, they are not a reliable or accurate predictor of what you should be paying.

According to Solterbeck, specialists in sales incentive programs, most companies fall down when it comes to designing, executing or building solid foundations for their sales incentive plans.

Design
Designing sales incentive plans receives the most attention by sales mangers, HR and executives; however some of the common pitfalls in design include selecting measures that cannot be supported by existing systems, designing overly complicated schemes, a lack of clarity in plan documentation, and poor target setting.

Execution
Even when design is first class, plan execution is usually under resourced and not properly managed or administered, resulting in plans being either too costly to administer or too complicated to work.  Plans are often poorly communicated and are not supported by systems which make modifications and reporting difficult and create confusion within the sales team.

Foundations
Before you begin to design and execute the plan, you need to build on solid foundations. What is the purpose and principles that underpin the compensation strategy? Most companies fail to answer this question because there was not a consistent, robust, and documented agreement across the business as to what the foundations are.

Recently, I wrote on ‘Measuring and managing the right things in sales’ and ‘Creating effective performance management systems’ which are critical to this topic and help form the foundations you need to support any well defined sales incentive plan.

If you are experiencing the following problems with your sales incentive plan:

  • too hard or too complicated to understand (it should be able to be explained on one page and easily understood by all involved, including non sales people)
  • too costly to administer
  • no emphasis on profit margins (i.e. no consequences for unnecessary discounting and sales based only on volume not margin)
  • too ambiguous (not enough emphasis placed on clear and accountable performance criteria that support company goals)
  • sales people do not know where they stand and cannot work towards or predict their incentive outcomes based on their actual performance

Then you may want to consider the following questions:

  • Why do you need or want a sales incentive plan?
  • What do you want your sales incentive plan to achieve?
  • How does your sales incentive plan drive superior, sustainable sales results?
  • How does your sales incentive plan support or detract from current company goals?
  • Can you easily measure and manage sales performance?
  • Can the sales incentive plan be easily explained, understood, and implanted?
  • Can you define the goals for your company and then determine how the sales force will support you in achieving these goals?
  • How do you intend to grow your business via your existing customers and new customer acquisition?
  • What type of mix of sales and support roles do you need in your sales team and who is doing what (account management, new business development, the up-selling and cross-selling, etc) to retain and generate more sales?
  • Who, and for what, should get rewarded?
  • Do you want to reward team or individual performance? Or both?
  • What does it cost your business to make, grow, and retain sales?

These are some questions, among others, that you may want to ask at all levels in your business.

Each business varies in their strategies, goals, and objectives because each business is likely to have a different business model or be at a different point of maturity.  If you choose to have a sales incentive plan, make sure it is linked to your current strategy and drives the right performance for where your business is currently at and where you want to take it.

It takes thoughtful effort to build the sales incentive plan that is right for your business.  Keep it simple and make sure you review the effectiveness on an ongoing basis because if you change your business and go-to-market sales strategy then chances are your sales incentive plan will need to change too.

Remember everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT.

No Comments »

Should I fire my bad clients?

November 18, 2009 in Customer Service, Sales Planning, Value Creation

Run a mental checklist over your client base right now.  Who fits into the ‘good’ client list and who falls into the ‘bad’ client list?

It all really depends on what you define as good and bad.

As we know not all clients are good for your business. Some clients are a wrong fit for your business but could be a good fit for someone else;  therefore in of themselves they are not necessarily ‘bad’.

However, others are just downright bad for your business.

It is important to consider how much your ‘bad’ clients are costing you in terms of time, money, frustration, people and product resources, lost productivity, bad press, angst, legal fees, and tarnished reputation?

If you have too many customers falling under the ‘bad’ column you need to ask yourself, “How did this happen?”

Have you set yourself up as a magnet for overly demanding, time consuming, nit picking, miserly clients who do not see value in what you do or offer and seem to want a slave rather than a legitimate business partner?

Have you set yourself up to be taken advantage of by unscrupulous and unethical people looking for victims?

It is difficult to focus on your best clients if you cannot shed your ‘bad’ ones.

For example, there has been recent media attention on the rise in Businesses Pheonixing; the act of Phoenixing is where a new company is formed to buy the assets, contracts, and goodwill of the failing business for a reasonable market rate. The legacy debt is left within the old business which is then liquidated thus allowing the new Phoenix business to trade on, debt free. Creditors and Suppliers to the old business are often left with unpaid debts which may in turn lead them to suffer their own financial difficulties.  I am sure no one wants to be put at the mercy of Businesses Pheonixing (‘bad’ clients) if they can help it.

Chasing the ‘easy’ or ‘quick’ sale may be more trouble than it is worth especially if the prospect or client is not properly investigated in relation to their legitimate needs or their intentions are clearly defined.

So, what constitutes a ‘bad’ client?

Besides the obvious impact of bad debts, there are other criteria which constitute ‘bad’ clients. Here are some examples:

  • They are bad credit risks with a track record of always paying late or not at all – they can be checked out by using reputable credit agencies that keep track of people and companies’ credit ratings.
  • They are a poor fit with what you offer and what they need thus leading to misunderstandings, poor relationships and confusion – this is usually due to a poor sales approach and not properly understanding your client and their needs in the first place.
  • They are overly demanding on your QA or Customer Service departments – the ‘nothing is ever right’ syndrome and all they want to do is complain.
  • They ask for expensive prototypes or very detailed proposals with little probability of a significant purchase – what is usually happening here is that they are siphoning you for your Intellectual Property at no cost to them so they can either do it in-house or get someone cheaper to implement your idea.
  • They only want to deal with ‘you’ and expect levels of service that do not go with their purchasing level – they expect first class service when they are buying ‘no name’ or house brand products at very small volume.
  • They complain loudly, often, and publically to anyone who will listen and usually only for ‘effect’ not fact.
  • They do not keep their promises and break contract conditions regularly.
  • They take your IP and claim it as their own.
  • They say one thing and then another – you never know where you stand with them and they seem to play games, trick you or set traps.

Don’t be fooled by these types of clients they are not worth it, no matter how attractive they look on the surface and how desperate you might be to get a sale.  Unfortunately, when times are toughest we can fall prey to these types of prospects or clients which can lead to more stress and less return on investment.

An experienced business banker once told me a story about an entrepreneur and business owner who was looking for a new bank to work with. On the surface this individual and his business looked plausible, charming and sincere, but when the business banker did his investigation, he discovered a litany of evidence – failed businesses, bad debts, frequent changing of banks, poor staff retention and staff legal issues and a myriad of other things that did not bode well for this prospect becoming a valid business banking client.  As you could imagine the aforementioned business banker did not proceed with that prospect.

If these types of business people continue to behave in this manner they will eventually run out of legitimate business suppliers or partners to work with and sadly if they do, they will usually pull up stumps and go and find fresh victims to exploit.

Another tell tale sign is that they will not have a history of any longstanding, viable relationships of any value or substance.

Many people have slated the sales profession as being ‘shifty’ but in truth most sales people and their clients are out to do the right thing by each other.  So, it pays for the sales person to also be on the lookout for the potential ‘bad’ client and do proper investigations. So don’t believe everything you hear. Do your homework.

So why not have a conversation with your sales team and run your collective eye over your client base to see if you do have any of these types of ‘bad’ clients on board?  Then work out a strategy to let them go, learn from your mistakes and don’t get mixed up with these types again if you can help it.

Maybe it’s time for a client spring clean.   It might just free up your time to find and work with more productive clients

Remember everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT.

1 Comment »

Sales is a team effort

November 11, 2009 in Communication, Customer Service, Sales Skills

Sales numbers and sales processes should be understood and owned by everybody in your organisation.   In today’s world if you are not directly in sales you are supporting someone who is.  This is why sales really is a team effort.

Rather than being just about a feel good factor and great staff alignment, this has practical applications as well.   For instance with the ability for customers (or anyone)  to find and connect with anyone in your organisation through many difference channels (i.e. social networks, Google, etc.) the whole business needs to be sales fit.

With anyone being able to contact anyone anywhere anytime it is critical that all your staff understand:

  • What your company stands for (in language they and the customers understand)
  • What  your company sells and how it supports your customers
  • How they need to sell and service customers
  • That everyone in the business either sells directly or supports someone who sells

If not problems may arise that cause more issues than they are worth.  For example imagine a customer, unhappy with a software product they have purchased, finds the name and number of the lead person who developed or designed the software and calls them directly to complain.

What happens here?  One of several things could happen.  Here are some examples:

1)    The Software designer/ developer actively listens to the issues of the customer, empathises with and understands their issues completely, helps the customer resolve their issues in the most effective manner possible, the customer feels heard, understood and able to work in collaboration with the person and the business. In addition the software engineer may take on board the new suggestions and consider them for future upgrades.
or
2)    The Software designer/ developer is stunned by the out-of-the-blue call and doesn’t know how to deal with the customer so after some mutterings hangs up on the customer.
or
3)    The Software designer/ developer tells the customer they don’t know what they are talking about and gets into an argument with the customer resulting in either the customer or software engineer hanging up.
or
4)    The Software designer/ developer tries to help the customer but gets too technical using jargon the customer doesn’t understand leaving the customer feeling more confused and perhaps frustrated or even angry.

This issue and others like it are becoming more common place leading to more customers voicing their disquiet in all sorts of public ways – just think Twitter for example.  Customer complaints are no longer residing in the domain of the customer service department anyone can read about them these days – thus leaving businesses brand and reputation exposed to ridicule rightly or wrongly.

How we handle difficult customer situations says a lot about us and our companies.

So how many of the key people in your organisation (read CFO, CEO, Operations Manager, Product Mangers, Distribution Manager, Sales Manager etc.) are skillful at communicating and handling customer enquiries, complaints, and feedback?

How many of them have been specifically trained in communication, customer service and selling skills?

How many of them can model these skills for the rest of your team?

The communications skills training most senior managers would receive is in how to handle the media but I think they would be better served if they were trained in contemporary customer service and selling skills first.

Not handling  customer issues, feedback or requests well leads to many of these media issues in the first place, so why not address it at the core?   Let’s train everyone in contemporary customer service and selling skills and processes and make sure we all understand how our actions can enhance or detract our company.

We all need to make sure that we have the sales and customer service processes in place that people can follow and apply effectively.  All our people need to be trained in the necessary sales and customer service skills so they are in the best position to handle and manage customers calls and ensure that our organisations are well placed to best serve our customers.   Even if the customer is wrong about something it’s all in how we handle it that means the difference between a positive and negative experience.

I was taught a valuable lesson early on in my career when I was working in recruitment.  The lesson was this: I was told you are going to tell more people they did not get the job than you will tell those who did so make sure that every contact you have with anyone is always done in a constructive and positive manner.  Try to be of help no matter what and ensure the person knows you did you best even if the best meant delivering bad news.  People will appreciate your honesty and the effort you took to be of service to them.

I would highly recommend that core sales and service competencies be defined and included in everyone’s job and person descriptions and be made a conscious part of all our roles through effective, relevant training and on-the-job coaching support so they become a way of life not just a fad.

So, next time you decide to train your sales staff in selling skills and processes, make sure they are the right selling processes and skills suitable for your business environment and do yourself, your team and your customers a favour by also including all your other staff in the same training.  The rewards are great in terms of teamwork, customer satisfaction, staff alignment, customer retention and, of course, better sales results and brand currency.

Remember everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT

No Comments »

Creating an effective sales performance management system

November 4, 2009 in Culture, Performance Management, Sales Leadership, Success

Following on from last week’s article about managing and measuring the right things in sales, I thought it would be worth looking at some of the key principles for effective sales performance management systems.

The first place to start is to align your sales performance management system and subsequent key measures to your organisation’s strategy and goals.  It’s then the job of the CEO and the Sales Leader to ensure the organisation (that means everyone else who supports the sales effort)  is aligned to the sales performance management system.   When this dimension is in place the organisation is best placed to sustain high sales performance.

Issues arise when the non sales teams impose their ‘numbers’ or ‘tasks’ on sales teams which are unrelated to the effective sales performance.   i.e.

  • The CFO being critical of missed forecasts and not looking into or understanding the underlying reasons why
  • The Executive team demanding more activity (i.e. make more sales calls) and not understanding the potential negative impact on effectiveness
  • Marketing engaging in lead generation activities that either generate the wrong leads or leads that require out of scope qualification meaning they’re in the forecast prematurely.

This leads to competing motivation, confusion and reduced sales performance across the board.

Another key area worth noting is the importance of addressing and working with values and explicit behaviours.  This is now much higher on the agenda of many businesses now, not just the outputs of performance as we discussed last week.

While the focus of this article is directed towards sales, this principles presented here can be applied to any role in your organisation. As you read through the items below, bear in mind that this is not prescriptive in nature and you should use only what works for you.

Principles of an Effective Performance Management System:

  • Reflect an organisation’s values and strategy.
  • Commitment to the system should be obtained from top management and communicated to all employees. Ideally input should be sought from all levels to gain their engagement.
  • Business objectives need to be linked to team and individual accountabilities.
  • Performance measures are developed for each function and individual to ensure that their performance is aligned with the needs of the organisation.
  • Feedback is provided on an ongoing basis, not just during the annual performance review. For instance, this would include coaching conversations.
  • Expectations and communication should be transparent and consistent at all times.
  • Employee development and future behaviour are the focus of attention, not just past performance.
  • A partnership between the employee and manager is developed based upon open dialogue, two-way feedback, and shared responsibility.
  • Employees are encouraged to take accountability for their own performance and success.

Benefits of an Effective Performance Management System:

  • Encourages open, constructive communication between managers and employees.
  • Provides feedback on how people are doing on the job.
  • Allows for mutual understanding (between manager and employee) of each employee’s job responsibilities and performance expectations.
  • Facilitates identification of individual capabilities, strengths and areas for development.
  • Identifies factors negatively affecting employee performance (e.g. work environment, job design, organisational policies and practices, personal issues, external factors, etc) so that action can be taken to alleviate them.
  • A structured and documented process encourages objective evaluation and fair treatment.
  • Assists in the achievement of strategic goals.
  • A consistent way of setting goals, monitoring performance and formally reviewing performance.
  • Self-managing for proactive individuals.

Remember everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT

1 Comment »

Measuring and managing the right things in sales

October 28, 2009 in Performance Management, Sales Management, Self Development

Who wants to work with accountable, responsible, and self-directed sales people?  Of course we all want these types of sales people in every sales team.  Yet, most businesses do not support this by setting up their sales team to clearly measure and manage their sales performance.

Sales performance management begins with accurate role descriptions and perception, data collection, and measurement in line with set goals and strategy, however many organisations measure only one variable, sale results (outputs measures).

This type of approach leaves businesses and sales teams in the dark about how they arrived at their sales results making it hard to replicate good results and eliminate poor results.

What is needed in sales teams are clearer measures of what constitutes good sales performance and we need to be able to measure and manage the right things.

So, what is performance and why measure it?

Performance can be equated to behaviour, as it involves what people actually do. It is observable, measurable, and can be changed through the learning and application of new behaviours.  It is, however, important to select the right measure in a performance management system as performance measures can influence behaviours and attitudes within the organisation. A good performance measure will reinforce desired behaviours, while a poorly selected or incorrect measure can encourage behaviour that is unproductive and inappropriate.

An effective Sales Performance Management System measures sales results (output measures) and two additional critical variables, input and behavioural measures. The framework means this is done in a consistent and structured way.  The following diagram illustates examples of Input, Behavioural and Output measures for sales people.

Input, Beh, Output Measures Small

Evaluation ArrowBy giving sales people access to explicit performance information about how they need to do their job they can begin to align themselves to organisational expectations.  With adequate training and coaching to support them we will now have sales people working consciously in their roles and on themselves to achieve greater, more competent performance.

Take this opportunity to check if, or how well, your sales people know their performance measures and are they on the path to being accountable, responsible, and self-directed sales people.

Remember, everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT

3 Comments »

← Previous Entries
Next Entries →