This CEO learned a valuable lesson during his past life as a steelworker: A company should compensate its sales force based on fair and reachable short-term goals.
Alan Schultz, 42
Present life: CEO of Valassis Communications Inc., a $795-million marketing-services company based in Livonia, Mich.
Former life: Steelworker. At 21, between terms at the University of Michigan, Schultz manned the graveyard shift at TFC, a local supplier to Detroit's automakers. "We worked in groups of four. We had to load 200-pound sheets of steel onto racks and later unload it after it had been lifted by crane and dipped into these 130-degree pickling tanks," Schultz says.
"If your team didn't get through 100 tons during an eight-hour shift, you'd be put on probation or let go. Getting to 100 was not easy. They had this job timed out so perfectly that you had to bust your rear to make it. For going over 100, the pay wasn't a lot."
Lessons learned: "I like the idea of a base goal that's fair and reachable. It comes in handy in terms of designing sales-force compensation. Otherwise, you have to be concerned that someone will do anything to meet their targets without concern for the company's needs."
"So you have to make sure the compensation is tied to more than a short-term window. When we started our sampling division, in 1995, we set goals for 20% first-year growth. But we let the team know that we expected 20% growth for the second year, too. And for the next five years. People were given both one- and two-year goals to meet. That way, they'd know that rash selling today may hurt tomorrow."
Since Schultz recalls that the pay per extra ton wasn't a great motivator, he uses incrementally stepped incentives. The further a salesperson goes over the target, the bigger the bonus is. Since 1995 the sampling division has grown from $2.4 million to $54 million.