I have long been a passionate proponent of commission only sales programs (including draw against commissions).  While revisiting the wide ranging reality of the sales professionals’ role and interactions with their organizations as they produce and help grow the business, I have had a significant change of heart.

The notion that most sales professionals are solely responsible for their growth efforts is, in many cases, outdated and misapplied.  In most businesses, the salesperson now relies on a team of resources to assist them with the client acquisition and management.  That they act in concert with the commitment, support, and dependence of a team does not make them solely responsible for, or deserving of, a compensation system that rewards merely one aspect of their role — results.

This is not to say that all commission only or commission intensive compensation programs are inherently outdated.  I am merely articulating an altered philosophical and business perspective that recognizes that sales professionals are not the only people participating in the growth process.  Further, their role is often merely not dependent upon or limited solely to new business activities or results.  If that is the case in your sales model, exclusively or significantly rewarding them for bringing in new business is financially inappropriate.  Hence, your compensation model is likely giving undue credit or overemphasizing a desired behavior  or expected outcome.

Defining what the compensation model is for a sales professional in your organization, I would examine and understand the following first:

1. What the sales process is:  Map out the entire sales process from lead generation through qualification activities to proposal generation to strategic development and planning to close.

2. Who else gets involved:  Understanding those people that have become part of the process is a required informational piece.  Before you can reward anyone for the results of the organization, you need to know what their specific roles, accountabilities, contributions were in relationship to the sales process.

3. What the post-sales relationship looks like: After a prospect becomes a client how does the organization supports and nurtures that relationship.   Again, take a close look at roles and process to understand the responsibilities and contributions of the various individuals or groups are in association with that process.

4. Define the financial allocation for new business and retention: In other words, assign the variable compensation the organization is willing to allocate to the results associated with both growth and retention. This figure is usually derived from a component of the percentage of gross profits associated with growth and retention.

5. Create a financial model that provides incentives to everyone: I am a firm and passionate advocate for the highly interactive, engaged and empowered team.  Compensating a lone-wolf sales professional solely on production that is dependent upon others does not bring strategies and teams together — it divides them.  Offer performance-based, performance-related compensation models to the team and reward the team for their outcomes.  This puts the sales professional in a leadership role to manage strategy, process, and the internal/external relationships necessary to steadily grow revenues.

While some compensation models may be perfectly suited for a commission only program, I do not embrace the notion that one-style fits all in the ever-changing sales arena.  Before you start drawing up a compensation plan understand your process, know who plays a critical roles in your growth model, and reward your team for the successful contributions for both growth and retention.

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As organizations continue to go through their transformational challenges, many are finally getting around to those components that will most greatly influence and affect their success – investing in their team.  During the chaos of the turbulent economic state the primary focus of many was survivalist one – reactive to profit, sales, bottom line obsessions.

Now that many businesses have stripped the organization clean of anything that could possibly be viewed as excess, they are coming to the harsh reality that business growth isn’t occurring as needed or desired.  The new reality is that existing customers aren’t very loyal and new clients simply aren’t jumping in the boat.  What these organizations have finally discovered is their teams are more important to growth and stability than they realized.

Unfortunately, the organizational transgressions of the past few years have fostered a jaded, bitter, burned out, and disjointed workforce.  While a strong, collaborative internal and external client facing team is critical to the future success of any organization, the events of the past has jeopardized and fragmented all those essential relationships.

In today’s economic climate, there is still tremendous opportunity to build strong client and employee relationships.  However, the key to these opportunities is dependent upon the committed investment the organization makes in developing and reconnecting their team.  Maximizing this return on investment in rebuilding their teams are founded in the following critical areas:

1. Talent: While over 60% (some figures are as high as 75%) of those currently employed are actively searching for a new professional opportunity; it does not mean they will simply make a move just because.  Attracting and retaining top talent requires an understanding of what the organization offers future employees in terms of development, growth, professional and financial gain, etc.  If your business does not have a process for evaluating, attracting, developing, and rewarding talent you will have a tough time bringing the right people into your firm.  Worse, you will have even a tougher time keeping them if the environment is not what they desire.
2. Time: Merely telling your current and future employees they are critically important to the success of the firm will fall on deaf ears.  Owners have trampled on the trust and dreams of their team.  Rebuilding that trust is going to take a focused, committed and consistent effort over time.  Team building is not a strategy du jour; if it is, your team will sense it and not engage.  Effective team building requires a structure, a process, a clear commitment and an investment in the time necessary for everyone in the organization to embrace the transitional commitment and the celebrate the associated results.  While business owners obsess over unrealistic expectations for immediate results – employees don’t respect, accept, appreciate, or benefit from the instant gratification exercises.  If you cannot invest the time, you will not get the results.
3. Training: Team building within an organization takes many shapes, involves many levels, and requires an organized educational effort.  Simply offering classroom training on processes or key performance programs is only a small part of the training effort.  Effective and valued training is really a commitment to the education and development of everyone on the team.  Productive curriculum programs include: communication effectiveness; empowerment and accountability; leadership and leadership development; strategy and collaboration; customer service and support; and, customized personal professional development programs.  While most firms are not able to offer all these programs using internal resources, the process of educating the team in a comprehensive manner demonstrates a sincere and real commitment to development most valued team-members desire.

Business organizations cannot correct the mistakes of the past.  However, they need not look to far to discover what other firms experiencing significant growth successes have done.  Successful companies have invested significantly in attracting, developing, and engaging their empowered, collaborative and innovative teams.  It is not too late to embrace their model of success.  In fact, it is more necessary and critical than ever.  The cost of client and employee churn, in conjunction with the financial gains in productivity and performance, more than offset the investment cost.  Engage and build your team – invest in developing them and celebrate the results of your efforts!

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Let’s read the tea leaves for a moment:  the stock market is in chaos, the economy has not really produced any real, new jobs, increases global economic tension, large corporations continue to hoard cash at record levels, and government leaders firmly divided to the point of fighting instead of building consensus.  In an examination of these trends, I clearly foresee another dip in the economy in over the next twelve months.

Though I am not an economist or a financial expert, as a business growth strategist the current state of the economy concerns me.  That said, I am not going to be one to panic, roll up the carpet, plan for layoffs and cutbacks, and look for the bottom to fall out.  The following is the cautious, yet practical advice from Micheal Alter in Inc Magazine recently:

I advise small business owners to plan for an economy driving in reverse, most likely longer than we’d all like. Hire only when absolutely necessary. Invest cautiously. And curtail spending…at least until the indicators point you act otherwise. While this perpetuates a cycle of a slow-to-recover economy, surviving this economy with healthy revenues is your number one goal.

I would like to shift your pragmatic mindset from “survival” to opportunity.  From a revenue and growth perspective, here is what I read and believe your future strategy needs to be:

1. Plan: Anticipate the challenges a down economy will have present to your best clients.  Make a list of the impact, the behaviors, and the obstacles a downturn will have on them.
2. Identify: Strategize how your experience, capabilities, and team can coordinate with them to collectively sustain your respective businesses through an economic upheaval.
3. Communicate: Take a leadership role in engaging them in conversations to explore new strategies, market approaches, and programs that you can jointly benefit from in this unsettling time.
4. Collaborate: Engage in a dialogue around innovation and teamwork. These are your best clients.  Your business is dependent upon their success.  Hence, your existence is dependent upon helping them discover ways to team up and be successful.  Bring them into the strategic tent and collectively solve the impending challenges you both face.
5. Commit: Instead of thinking ahead to layoffs, cutbacks, and reductions, allocate your best players to this program.  After all, they are and it is, your future.

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The loss of a customer is never a good outcome, especially in these competitive times.  Before anyone cons you into why that customer left, let me be the first to clarify one gigantic misconcpetion — your customer did not leave over price! 

A General Manager at one of my earliest employers used to goad salespeople claiming the reason they lost a certain account was “price.”  His response was, “Why is it that whenever we win an account it is the excellence of the salesperson and when we lose one it was because of price?”  While most sales professionals did not find any humor in his commentary, his philosophy was well placed and on point.

The final act of a customer departures may be the result of finding a better deal.  However, the reason they were looking in the first place was because they either did not feel valued as a customer or, they did not see the value in the product or service anymore.   Either way, their decision to leave had more to do with VALUE that anything else.  When they found a better deal, it was just that much easier to leave. 

Nothing is more important to the stability of your revenues than your existing customer.  Your best, long-term, loyal and valued customers are the foundation from which net revenue gains begin.  The churn of existing customers only results in an unstable revenue stream.   You, your sales team, your management team, and your organization have an obligation to nurture and value every customer relationships.  Treat your exisiting customers as good or better than you would your new customers.  And, always take time to demonstrate your appreciation and value for their relationship. 

Your customers likely did not buy from you on price in the first place; don’t let it be the excuse for them leaving you.  Educate your sales people and your organization on valuing all good business relationships all the time.  It will do wonders for your revenues!

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In earlier posts I have discussed the simplified economics of maintaining and expanding existing business and customer relationships.  Despite the wisdom and the accuracy of this premise, I continually finding myself educating business owners on the financial benefits of investing in maintaining and improving customer relationships as opposed to investing in salespeople to find and acquire new ones. 

The following is an account of a recent experience where a business learned this lesson in a very expensive way.  Fortunately, we solved the problem before it cost them more.

I was working with a customer who had brought me on board specifically to help him recruit, develop and manage his sales team.  Most of his existing sales professionals were experiencing massive sales declines (35-60% over three years) and he wanted me to bring in some new members to his team as he was convinced the existing ones weren’t working hard enough.

One of the first steps in all of my engagement programs is to go to the source for all information about the business – the customer.  I brought the owner along as the interested party and provided him with three simple questions to ask his best, most loyal, biggest, and most profitable customers.  All of these customers were spending around 50% less on average what they had purchased in the past. 

What we learned was that it was not the economy that lowered customer orders, despite what the sales team was saying.  Instead, the customers had all become very frustrated with the customer service department (run by the owner’s brother-in-law) and had taken what business they could to other suppliers.  All this business was now providing their customers were products that his customers believed they could not get elsewhere.  It was not the economy or, arguably, the sales team; it was the customer service department that had eroded the business. 

Four lessons were imparted on this business owner through this experience:

1. Get in front of your customers.  This is not a job for a marketing survey or the salespeople, this is a job for the owner/executive.  They will tell what you need to know — provided you ask them.
2. Value your existing business.  Know why they bought from you, why they buy from you today, and what they value.  If you don’t know this, you do not know your business.
3. Educate your sales team.  Too much time, effort, resources, and energy is spent telling salespeople to go get new business.  The expense of this push is their limited understanding that new business and better business can be derived from existing customers much more easily than from new provided they have the relationships to do it. 
4. Don’t hire family to run or ruin key functions.  Just kidding.  Hiring family is a sensitive area and I will leave those decisions and risk up to each of you.

Good customer relationships are hard to form and easy to destroy.  Treat them like gold and they will increase in value like gold.

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From the mail room, I received this email from a sales student who is feeling abused by their sales manager. 

Last year my company fired a sales rep in a connecting territory.  After they terminated this individual, my manager asked me to cover the existing accounts and do some business development in the region.  Being the team player I am, I agreed to help out.  The work essentially doubled the size of my territory.  While I didn’t do much new business, I did a great job of stabilizing the existing relationships of the twenty accounts in the territory.  One year later, my manager informs me that they have hired a new rep in the area.  They are taking those accounts back and would like my assistance in the training and transitioning of this business.  I am a little disappointed in how this was handled.  What are your thoughts? ~ J.C. Hartford, CT

1. Clearly communicate expectations: This salesperson took on an added burden at the request of her manager.  At no point did her manager articulate what was going to be expected of them in future or how long this arrangement was going to go on.  A great sales manager would have clarified the situation, defined the expectations, and articulated the time frame for this territorial change.  If there was no plan in the first place, then the sales manager has an obligation to develop and define one with the sales rep before putting them in the territory.
2. Recognize and compensate for exceptional performance: This commitment doubled the geographic territory, increased the workload of the sales rep, there was little upside commission, and saved the company money.  Where’s the appreciation and the gratitude.  Kudos to the sales rep for not asking “what’s in it for me?”; but, shame on the manager and the company for not showing gratitude for the effort and the commitment.  Technically covering open territories are the sales manager’s problem; so this sales rep did the manager a big favor, as well.
3. Test your plan before you execute it: This manager simply made a move to eliminate a position and, without much other consideration, simply plugged another sales rep in to cover the territory.  This was likely not a very well thought out plan.  It would have been a much better situation for all if the manager had developed their strategy, shared it, created some incentives for the parties involved, and then put it into play.  Instead, this manager simply made his moves without a lot of consideration for its impact on those involved.  Not my style of management.

Sales management is more strategic, thoughtful, and organized than simply moving people around.  This was simply an example of bad sale management.  I would love the opportunity to share this experience with the offending party to, hopefully, avoid a repeat of these mistakes.

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