Gremlins In Your Machine Part 2
10 Simple Truths For Sales Success - And It Ain't Brain Surgery! Episode 17
Last episode we started to look at the different ways Complexity Gremlins can “gum up” your sales machine.
We also introduced the simple truth that if you want your sales efforts to be successful:
This week we’ll continue to look at Complexity Gremlins - specifically those that can wreak havoc with your sales people …
Complexity Gremlins Type #2 - Your Sales People
Commission Plan Gremlins
Quotas and commission plans are an important component of managing salespeople and they are the mechanism by which we incent the sales team to perform to certain criteria.
But if you’re not careful, the Commission Plan Gremlins will sabotage that mechanism.
Quotas and commission plans act as drivers of a sales person’s behaviour:
“Anything you measure will impel a person to optimize his score on that metric. What you measure is what you’ll get. Period.”1
Some people take that literally and try and measure as much as they can.
However, when it comes to commission plans:
The big mistakes I continue to see are either over-complication of commission plans and/or questionable goals.
Many commission plans I’ve experienced that didn’t work were complex and primarily designed to:
minimise the commissions paid to the sales team and/or
try and incent the behaviour of the sales team across numerous criteria
The result?
They lost the “hearts and minds” of the sales team and the complexity led sales people to revert to more simplistic goals for themselves or in some cases, caused them to leave altogether.
Setting Quotas To Minimise Commissions
In many organisations, quotas are often not achievable.
They are usually based only on consideration of a top down analysis (i.e. what the overall corporate revenue goal is) and not also on a bottom up (i.e. what the assigned territory will bear) basis.
Or they’re based on a “desired” flat percentage increase applied to the previous year’s quota.
It is usually true that:
“when 10%-to-20% of salespeople miss their goals, the problem is most likely the salespeople. But when the majority of salespeople miss their goals, the problem is the goals” 2
As a sales person, it’s always been taboo in sales to question your quota as it signals a lack of self-confidence and “weakness”.
But I’ve seen first hand that when quotas are set so high that a sales person can’t see how they are going to achieve them, it quickly leads to high levels of disengagement, low satisfaction and high turnover.
I’m reminded of the old industry adage - “I wouldn’t insult your sales skills with a low quota”.
I am also surprised by other delusional theories that favour setting aggressive quotas because they play to a sales person’s competitive nature.
A salesperson’s competitive nature doesn’t extend to accepting unachievable quotas.
That’s a bit like hobbling both knees of a sprinter and then berating him for his lack of competitive spirit when he complains.
Good sales people need to see the logic behind, and a clear path to, achievable goals.
But “achievable” doesn't mean “easy” - quotas need to extend the sales team so that they are encouraged to be more innovative and disciplined.
I’ve seen the benefits of assigning “stretch-goals” (and providing extra commission “kickers” for meeting them) for the sales team. These are additional quotas that are purely reward-based and not punitive if they aren’t reached.
At Cisco, the concept that “stretch quota is the quota” became ingrained into the sales culture and really pushed us to overachieve.
Stretch goals are good because they change the focus and mindset of the sales reps from a negative one ( “I’ll get sacked if I don’t make my quota”) to a positive one (“I can make extra $$$s if I hit stretch”).
Of course it’s still the same balancing act - keeping quotas/goals realistic versus stretching the sales reps.
Don’t complicate the sales person’s life by giving out quotas that don’t make sense.
Setting Commission Plans To Incent Across Numerous Criteria
The second intended outcome is usually evidenced by the accompanying commission plans being unusually complex to understand.
Back when I worked for a global Enterprise Software Company the Global Incentive Plan ran to thirty-three pages!
I kid you not.
In addition to that, it provided for incentives on fourteen different criteria – that’s right – fourteen different goals, all of which were supposedly a priority!
Think about how much time and effort would be involved on the part of the sales person to understand and then craft strategies to implement the plan - time and effort that could be better spent out with customers understanding their needs and crafting strategies to help them.
So the sales team’s prompt reaction was “Really? OK, let me pick out the one or two criteria which I know I can achieve/over-achieve and I‘ll just focus on that/those”.
So, despite the organisation’s attempt to “engineer” multiple behaviours from the sales team, the complexity of the plan completely nullified those attempts.
What’s the result of all this?
Almost always - poor sales performance, low employee satisfaction and high sales team turnover.
Commission Plans Done Right
So, what’s the solution?
From what I’ve experienced:
don’t be stingy with commission payments – it will just increase inertia to good sales performance
make the commission plan as simple as possible so a sales person can easily understand how to achieve or exceed their quota/s
set quotas based on consideration of both a bottom-up as well as a top-down analysis
make quotas achievable (not easy but they must be achievable)
do not have any cap on the commission achievement (especially for star performers):
“capping commissions when salespeople are hot may control costs, but it also encourages stars to quit selling”3
set, and reward achievement of, stretch goals as part of the plan to foster a high growth/high reward culture
make commission plans relevant to the desired expectations of their role (ie. focused on results not activities)
During its early high-growth phase, Cisco was very generous and simple with its commission plans (i.e. the sales team simply got a percentage of anything they sold) and in fact made many in their sales team wealthy as a result.
But Cisco didn’t begrudge them that financial benefit - and it still exceeded its own financial goals.
You do the maths though – I’m sure you’ll find that even what’s considered to be “generous” commission payments are relatively low as a percentage of overall deal revenue.
Further recent research brings more insights and confirms some of my observations about compensation and commission plans:
“What would I tell sales force managers to do differently? Some of my advice would be straightforward: I would urge managers to remove the caps on commissions or, if they have to retain some ceiling for political reasons, to set it as high as possible. The research is clear on this point: Companies sell more when they eliminate thresholds at which salespeople’s marginal incentives are reduced … I would tell sales managers to be extremely careful in setting and adjusting quotas. For instance, the research clearly shows that ratcheting quotas is detrimental…. It’s important to keep quotas at the right level to properly motivate people. I would advocate for a pay system with multiple components—one that’s not overly complicated but has enough elements (such as quarterly performance bonuses and overachievement bonuses) to keep high performers, low performers, and average performers motivated and engaged throughout the year.” 4
Micromanagement Gremlins
Too often in my career, I’ve worked with/for managers that hire good people and then proceed to micro-manage them to death. The problem is that it complicates a sales person’s role unnecessarily and:
“Micromanaging dents your team’s morale by establishing a tone of mistrust—and it limits your team’s capacity to grow”5
There will be situations (i.e. a junior) where you will need to keep a close eye, but otherwise my preference is to hire the right people, empower them, be there to help when needed and generally get out of their way.
Micromanagement is also bad for leaders:
“If your mind is filled with the micro-level details of a number of jobs, there’s no room for big picture thoughts”6
And research7 suggests that there are two important strategies in avoiding the Micromanagement Gremlins:
correctly timing when you step in to help employee/s (i.e. after problems have appeared, not before)
help the employee/s to understand that you are there to help and not judge
Team Management Gremlins
These types of Gremlins are particularly insidious as they can directly impact your sales team’s performance.
Coaching Gremlins
As a sales leader, it is critical to consider the impact of coaching on the performance of individual sales people. A classic research paper on sales coaching, underlines this:
“research by the Sales Executive Council shows that no other productivity investment comes close to coaching in improving reps’ performance.”8
In it they espouse what has since become generally accepted wisdom in sales leadership:
“our research shows that coaching is almost worthless when it targets the wrong reps … in research involving thousands of reps, we found that coaching — even world-class coaching — has a marginal impact on either the weakest or the strongest performers in the sales organization ….the real payoff from good coaching lies among the middle 60% — your core performers.”9
Thus were borne the mantras ”you can’t coach the dogs out of the kennel” (i.e. the bottom 10%) and you should “coach the stars for retention” (i.e. the top 10%).
I mostly agree with this assessment out of my own experience – but with one caveat – I believe it is possible to coach some “dogs out of the kennel” because it depends on the context – those “dogs” might have been relatively new sales people, or they have had poor sales leadership in the past etc.
So my caveat is that we should prioritise the core performers for coaching over the bottom 10% but don’t completely ignore the possibility of coaching to find “diamonds in the rough” in that bottom 10%. It is rare, but it happens.
I once had a sales person in my team who started working in the company at age eighteen in the storeroom.
He’d never had proper sales leadership and he was behind in his quota but didn’t seem to care. He had two key attributes that stood out to me – he was a great relationship builder and understood the solutions he was selling very well.
But despite his clear aptitude for the role, his attitude was all wrong. He wasn’t approaching the role with any professionalism.
Over the course of six months I provided close coaching regarding his attitude/approach to the point where he became one of my “stars” and went on to various successful sales leadership roles in the industry.
I was proud to have coaxed him out of the kennel!
Over the years, I’ve found the following simple principles to hold true:
the sales leader is best placed to be the most effective coach
coaching sessions are NOT performance reviews
the best approach is to customise coaching and feedback at the individual level of every member of the sales team (each situation is different)
ask open questions
listen more than talk
encourage the employee to direct the session
coaching is most effective when it’s done “on the job”
don’t throw the “dogs” out without due consideration
Follow these principles to prevent an outbreak of Coaching Gremlins.
Focus Gremlins
To avoid these gremlins, sales people should simply be held accountable for focusing on their role like it’s their business of which they are the CEO.
As part of this, a sales person should know where to spend their time and where they focus.
I’ve found the following simple mantra to work well in managing sales teams and directing their focus:
This means that each sales person should simply focus on:
managing their overall business (i.e. have a documented plan/s in place - this should be a simple “Plan On A Page” as per Episode 16) and:
managing their territory by prioritising their activity
managing their pipeline by ensuring the right amount of activity - that each sales person knows if the size (i.e. how much) and quality (i.e. probability of closing) of their pipeline is enough for them to meet their annual quota. It is also critical that they project for themselves (ideally monthly) where they are likely to finish so that they can take corrective action where required
creating leverage through the partner community (if you use channel partners)
managing their specific opportunities (i.e. covering the five critical things that must be done for each opportunity):
ensuring relevance of the solution to the customers’ problem/need
ensuring differentiation of the solution versus the competition
ensuring access to the true decision maker/s
driving the opportunity through the sales cycles and
having an agreed plan to close with the customer (i.e. refer to Value Plan Agreements in previous episode)
Summary
If you don’t want to gum up your sales effort, then:
Simple methods applied in managing your sales team will avoid gremlins in your quotas & commission plans, management, coaching and focus approaches and will contribute to the right outcomes in your sales efforts.
Next Week
Next episode we’ll keep looking at Simple Truth #7 and explore the final types of Complexity Gremlins that can gum up your sales machine.
Brain surgery is not for the faint hearted; neither is a career in sales. Brain surgery benefits from simplification; so does sales. And that’s where the similarity mostly ends. In a sales career that has spanned over thirty years, I’ve noticed 10 simple enduring truths that contribute to, or detract from, sales success. And it ain’t brain surgery! We'll look at these in detail via a weekly episode delivered direct to you via email if you subscribe for free below …
“You Are What You Measure” by Dan Ariely, Harvard Business Review June 2010
“Five Ways That Higher Sales Goals Lead to Lower Sales” by Andris A. Zoltners, PK Sinha, and Sally E. Lorimer, HBR, September 12, 2011
“Motivating Salespeople: What Really Works” by Thomas Steenburgh and Michael Ahearne, HBR, July–August 2012
“How to Really Motivate Salespeople”, Doug J. Chung, HBR April 2015
Muriel Maignan Wilkins, co-author of “Own the Room” in “How to Stop Micromanaging Your Team”, Rebecca Knight, HBR August 21, 2015
Jennifer Chatman, a professor at UC Berkeley’s Haas School of Business in “How to Stop Micromanaging Your Team”, Rebecca Knight, HBR August 21, 2015
“How to Help (Without Micromanaging)”, by Colin M. Fisher, Teresa M. Amabile, and Julianna Pillemer, HBR January–February 2021
“The Dirty Secret of Effective Sales Coaching”, Matthew Dixon and Brent Adamson HBR January 31, 2011
“The Dirty Secret of Effective Sales Coaching”, Matthew Dixon and Brent Adamson HBR January 31, 2011