My Dilemma: Our Sales Commissions Made Employees Complacent
By Jared Franklin, President, Chase Technology Consultants, Boston
What do you do when your ace sales staff becomes complacent right after receiving a large commission? I was faced with two options: I could allow myself to justify the behavior as tolerable given the overall annual revenue these people generate. Or I could take action.
I chose the latter approach, and took a deep look into what motivates my employees and how they set their personal and financial goals in both the short and long term. That led to a complete overhaul of our original -- very basic -- commission program. Today, it's a more robust behavioral program we call the CTC Quota System.
Too much money at once
The first problem with our original commission program was that it paid our sales staff based upon milestone deals that happened too infrequently and resulted in far too large commission payments at one time. Commission milestones occurred on the fifth, 10th and 16th deal closed in a 12-month period.
However, our business is not transactional: The lifecycle of a typical deal spans one to two weeks -- or more. As a result, our top performers were earning commissions only once or twice per quarter, and the checks were so large that they were more like end-of-year bonuses than commission payments.
At first glance, this strategy might not seem to present an issue. But when I looked more closely at the sales behavior of our top-level sales guys I uncovered the program's critical flaw: Large lump-sum commissions paid out all at once created complacency and a lack of motivation to repeat the stellar performance the following month.
As an IT staffing and recruiting company for software engineers and technology professionals, our sales cycle is complex and requires a whole series of steps to be successful. This was the second problem with our original commission program: It focused way too much attention on the final result -- the deal itself -- rather than the important and concrete sales behaviors, motivations and actions that go into achieving it. In other words, we were missing the opportunity to properly motivate and direct the valuable behaviors necessary to prevent these less productive months that followed our top earners' commission payout.
Creating the new commission program
It wasn't easy to figure out how to create a system that would promote a more consistent level of high performance. So I decided to lock myself up in our conference room for two weeks to find an answer, with only my administrative assistant acting as a soundboard for my ideas.
My approach was to invite employees in one by one and ask for their input. I felt it was important to be transparent about why I was re-evaluating the existing program. I asked them to define their key motivators, as well as their specific goals as a sales professional and a CTC employee. I also asked what type of workplace culture they would like to see in our office, and what types of behaviors they would want -- and want to avoid -- in any future employees.
Ultimately, I decided to revise our system to reward employees not just for closing deals, but for reaching all the key performance indicators along the deal life cycle, such as the number of new job openings they attracted and the number of new job seeker relationships they developed. Employees would have the opportunity to earn commissions each month based on performance and these core metrics. I felt this strategy would promote consistency from month to month.
To explain the new system, I created a six-page document detailing every opportunity our salespeople have to earn a commission, and provided it to every employee. I also included examples to illustrate every possible scenario so that they could visualize earning it.
Improving performance
As a result of this practice, our business has grown tenfold -- our revenue from contracts went from $30,000 a month to $120,000 a month, and our permanent placements have also increased significantly. We are on pace to exceed $2.5 million in revenue this year, and we are looking to exceed $5 million by the end of 2012.
From a cultural standpoint, implementing this new monthly incentive and commission program helped us encourage our hungry, motivated, and competitive sales staff to do what they do best -- more consistently.
In addition to running Chase Technology Consultants, Jared writes the CareerJuice blog, works with Franklin Sports as a business development consultant and sits on the board of advisors for THINKnrg and Mass Energy Lab.
-- As told to Caitlin Elsaesser
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