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When it comes to sales forces, motivation is key, whether you have a sales team of one or 100. Professor Michael Ahearne, the executive director of the US-based Sales Excellence Institute and the editor-in-chief of the Journal of Personal Selling and Sales Management,has studied top performing sales teams, and believes that proper motivation is the key to top performance, increased revenues, and overall growth.
According to Ahearne, there are three core groups in a sales force: Laggards, core performers and stars. These typically make up 20%, 60% and 20% of sales teams respectively.
Despite these three clear groups, many organisations have imbalanced compensation plans, primarily because they tend to have one standardised compensation plan that does not take these differences into account.
“This means that some people are winning every time, but many more are losing,” he explains. “You’re probably not motivating 80% of your sales force.”
A scary statistic, so how do you go about rectifying the situation to increase your sales? The answer lies in understanding your sales team, and how they respond to motivation.
Ahearne offers these three tips when dealing with laggards, or your lowest performers.
- Quarterly performance reviews work best, as they help laggards plan their targets and time.
- Social pressure has been found to motivate laggards:
- Confidential, relative feedback is the lowest level of social pressure, and won’t galvanize laggards to action.
- Stacked rankings are great: It’s easy to see where each sales consultant ranks, highest to lowest. Those on the lowest rungs will want to improve.
- Worst to first also works. In this case, rank the lowest to highest performer. This switch leads to as much as a 4% increase in lowest performers.
- If you have the stomach for it, consider a wall of shame. The social pressure will push results.
- The ‘Man on the bench’ strategy has worked very well for many top international organizations. If you’re consistently the lowest performer (or the man on the bench), you’re first inline to leave. This has been proven to lead to big sales increases because laggards fear for their positions.
By contrast, quarterly performances have only a 4% increase in core performers, and a 2% increase in star performers. So what does work for your core performers, or your middle-rung sales reps?
- First, remember that your core performers make up the vast majority of every sales force. They might not be your star performers, but they’re still important.
- The key question you should be asking yourself is: How can we move this 60% forward to make them better performers?
- The challenge: Compensation plans tend to be geared towards star performers rather than core performers.
- The result? Core performers feel like they’re always just missing the mark, that the compensation plans are unfair, and that they can’t achieve what they deserve. Sales suffer as a result, because why try harder? They’ll never win the prize anyway.
- The solution: Core performers will never be top stars, so you need to devise a way for them to feel victorious, without competing on the same level (and for the same prize) as star performers.
- Multi-tiered targets can work extremely well in this regard. With goals within reach, average people achieve extraordinary things.
While your star performers bring in the lion’s share of revenue, they’re also a risk group because they are highly sought after – which means you need to keep them happy, motivated and incentivized to keep them from succumbing to another offer.
- It’s a bad idea to set or cap targets as you are effectively capping their selling possibilities by giving them a ceiling.
- Implement a ‘super bonus’ instead
- Capped stars achieve 17% less than uncapped stars.
TUF compensation plans
Ahearne believes all compensation plans should follow the TUF principle:
- T:Target to the right level. Who responds how? What optimizes them?
- U: Understandable. Do the sales reps understand their compensation plans? Many don’t.
- F: Fair. People must feel like the way they are paid and rewarded is equitable.
Finally, once you have a good compensation plan in place, measure, measure, measure. Don’t assume your compensation plans are working. Evaluate what you’re doing, look at the data and adjust accordingly.