At Business Interiors, the entire sales team is rewarded when it hits certain profitability levels. "It's like an instant reward. If they hit it today, then tomorrow they'll be rewarded," says John Sample. "There are multiple levels to it, and there's an ultimate goal for team performance and profitability. You still have to make sure there are individual rewards for the salespeople who are actually selling, causing the stuff to happen. But you want everybody to feel as if they're part of the sale, because they are. So you reward them on the success of the team."
At Robinson Brick, a part of every employee's performance bonus is based on the bottom line and on customer-survey responses. Some companies up the ante by also subtracting points for customer complaints.
Whatever your approach to compensation, you can be sure that if you radically change the way salespeople and the rest of the company work, something's got to give. When John Sample switched to a team-selling approach, he soon faced a bevy of hard questions, including, How do you measure different people's worth? His reply: "I use the analogy of a boat. You've got somebody steering and somebody running the engine and somebody bailing. Most of the time the bailing might not be the most important job. But if the boat fills up and is ready to sink, that becomes the most important job." Sample spent a lot of time talking to his teams about what they felt was fair. The company conducted a wage-and-salary survey, which has become an annual event. Sample also asked his sales teams to submit proposals on how and how much they'd like to be paid. "We weren't real far apart when we finally did that. It was my biggest concern, but it was really one of the smallest problems when it got down to it."
Rest assured you won't get it all right the first time. Delta Dental has tweaked its compensation yearly since it changed the way it does business. CEO Bob Hunter won't pretend his salespeople look forward to it but says they accept change "when they understand and participate in goal setting." Today Delta's four salespeople are charged with opening doors; they're paid a small base salary, plus various commissions tied to regional goals for new accounts, a group goal for adequate rates, and overall corporate goals. By contrast, the five account executives, who take over the accounts from the sales force, are compensated for maintaining existing business. Their base salaries are higher than the salespeople's, and they are eligible for three possible bonuses: for retention, profitability, and overall corporate goals. The profitability bonus is linked to how well the account execs work with the underwriting team to determine rates adequate for the claims.
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Transition Stresses
There's no way around it. When you start to change your relationship with customers, you're going to get some mixed signals. CEOs even use contradictory words to describe the experience: "joyful burden"; "exciting but painful"; "evergreen sales but not all roses." While many companies say they evolved into this higher form of selling, don't expect it to feel all natural. At times it will feel anything but. Here's what you may find:
You're likely to experience a sales dip even as margins rise, for several reasons. Often "better" sales take more time because you're selling higher up and to more people in a potential client's organization than before. (But as several CEOs point out, the longer a prospect "lets you stay," the greater your chances of getting and keeping the customer.)
When John Sample changed the compensation system at Business Interiors, there was a three-month phase-in, during which salespeople underwent training and retraining. "We took a hit in pay and some sales. Anytime you make a change like that, you've got to be willing to take the hit," he says.
Sales also took a dive at Fletcher Music Centers when the company lost about a dozen key salespeople. Those who left couldn't understand the new emphasis on service and couldn't accept the company's getting out of commodity-type sales. "They thought we were crazy," says John Riley. "In an organization like ours, in our industry, that was a very big hit. Back then, we were like everyone else; 80% of sales came from 20% of the people."
Riley wasn't alone in losing employees. Some can't or won't do business the new way. Just about all the companies featured in this story lost at least a few employees during the transition. Displaymasters was one of the fortunate exceptions. Still, Pechacek, the general manager, concedes it took a good six to eight months before everyone started getting comfortable in the new environment. "For those of us who've been around a long time, it's been difficult to change," says Displaymasters salesperson Judy Okerstrom, who's been with the company for 10 years.
The best companies have worked hard to come up with a fair program of evaluations, retraining, counseling, peer reviews, and, when all else fails, outplacement help. Most CEOs say it's critical to distinguish between those employees who can't accept change on any terms and those who haven't been given the tools to succeed.
We wish we could say this new way of working with customers will always bring you better prices and more customers. It won't. And you may not want it to. If, like Manco and G&F, you head toward doing more business with fewer customers, your increased efficiency means you can even offer key customers a lower price. And the more business your big customers give you, the more you can afford to be very competitive on price. Higher volume, greater efficiency, and lower selling costs, for example, have combined to push G&F's profits up even as its prices have stayed the same or dropped a bit over eight years.
