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management system. In total, the          keyed to the transactional speed of
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Howto Motivate Your Sales Forceto Great Performance

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Transcript of "Howto Motivate Your Sales Forceto Great Performance"

  1. 1. This article originally appeared in the September 2007 issue of The journal of high-performance business Compensation How to motivate your sales force to great performance By Richard J. Bakosh It’s not just about the paycheck. Effective incentive compensation management is based on an understanding of basic human motiva- tion—on the importance of trust, self-esteem, social recognition and improved chances to fulfill one’s potential. What motivates a sales force? It’s an age-old want to motivate those who remain to perform question, of course. But these days, it’s arguably at the highest productivity levels possible. more important than ever, as organizations In both cases, it’s a big challenge. (For a in many industries and different parts of the related article, see “Talent: Leveraging your world face critical talent shortages that could most important competitive asset,” Outlook, impede their plans for growth. September 2007.) During a time of worker scarcity, a better Based on Accenture research and on our understanding of basic human needs and of client experience around the globe, we the methods that can sustain high levels of believe that when it comes to successful motivation among a company’s sales staff is motivational approaches and incentive com- important for two reasons. First, organiza- pen-sation strategies, sales executives must tions need to motivate and engage their best “go back to go forward.” That is, they must workers to increase the chances those workers rediscover some of the basic and deeper will stick around. Second, when a large per- truths about what factors—besides financial 1 centage of a workforce is nearing retirement compensation—motivate their sales profes- Outlook 2007 or being lured to different jobs, companies sionals, and then use those insights to design Number 3
  2. 2. Insights1 point to some troubling a more comprehensive approach to incentive management. trends. For example, after two con- secutive years of improvement, the Creating a culture of trust; leveraging percentage of salespeople making the power of peer recognition; and their quotas declined in this year’s focusing on the enablers and tools survey to just 57 percent. that help salespeople reach their potential in an increasingly complex The reasons for this decline become business environment—these are all clearer upon closer analysis of the critical parts of the overall picture of findings. For example, the average motivating a sales force more effec- selling cycle is getting longer. Last tively. By gaining a deeper knowledge year, nearly 14 percent of the firms of human motivation, sales executives surveyed reported an average sell can put in place a more holistic cycle of one month or less; this year, approach—one that integrates people, that number dropped to just over 7 process, technology and compensation percent. The number of calls neces- strategies—to encourage and reward sary to close a deal has also jumped: the behaviors that help produce About 46 percent of firms said that Long sell cycles high performance. a typical sales cycle requires six or and declining conver- more calls, up from 35 percent four What’s more, gaining insights into years ago. And conversion rates— sion rates underscore what really makes a sales force tick moving from the initial call to the the challenges and has benefits that go well beyond presentation stage, and then convert- the sales organization, since many ing proposals to sales—are trending complexities of today’s of the lessons also apply to work- down again (see chart, page 3). forces in general. Not all workers, sales environment. of course, have motivations and What do these long sell cycles and incentives as tied to the very defini- declining conversion rates mean? tion of their jobs as salespeople do. First, they underscore the challenges But today, those managing all types and complexities of today’s sales of workforces are beginning to environment. As David Joyner, execu- understand what chief sales officers tive vice president of sales and have known for years: When it account management for pharmaceu- comes to motivating people toward tical services company Caremark, great performance, it’s not just about puts it: “The demands from customers the paycheck. and the pressure from competitors continue to rise, and that results In other words, something more is in a marketplace that has higher going on. The question is, what? expectations and more demands. To effectively sell solutions, and More work, less to show for it not just boxes, a salesperson needs If your sales professionals feel as if to have more knowledge across a they’re working harder today but have broader spectrum of products and less to show for it, they may be right. services.” That leads to what Joyner describes as “a situation where you The most recent results from an have to know more and sell harder, annual sales performance optimiza- but where you may be less effective tion survey conducted by CSO in your overall success rates.” 1 CSO Insights, in collaboration with CRMGuru.com, Selling Power magazine and Sales and Marketing Executive International, conducts an annual survey identifying and analyzing the challenges that are impacting sales performance today, and examining how organizations are leveraging people, process, 2 technology and knowledge to successfully address those issues. Input is solicited from professionals directly involved in the management of their organizations’ sales force regarding their sales teams’ per- Outlook 2007 formance across 100-plus different metrics. In total, 1,275 firms participated in the most recent study. Number 3
  3. 3. Selling is getting harder The number of companies Fewer companies are progressing And more companies that expect a short sales cycle to the demonstration phase of need to work harder to is shrinking. the sales cycle. close a sale. Average selling cycle is Converting initial sales call to presentation Sell cycle requires six one month or less stage more than half the time or more calls 2006 55% 2006 14% 2006 35% 2007 49% 2007 7% 2007 46% Source: “Sales Performance Optimization: 2007 Survey Results and Analysis,” CSO Insights, 2007; Accenture research A second implication of declining and tools, reduc-ing quote cycle success rates is that traditional times, getting better documentation, approaches to incentive management and developing a product that is are no longer adequate to the task. differentiated and therefore easier Dion Joannou, North America presi- to sell. Those are some of the things dent of communications giant Nortel that actually motivate salespeople— Networks, notes that “it’s important even more than sales compensa- that a company’s leadership work tion incentives.” harder at really understanding peo- ple. I spend a fair amount of time Joannou recalls a recent sales meet- thinking about the things, beyond ing attended by the head of the just compensation, that are going company’s supply chain manage- to motivate my sales team.” ment function. That executive listened carefully to the concerns Based on the results of Nortel sales expressed by the sales force about a team employee satisfaction surveys, number of supply chain issues that for example, Joannou has divided were sometimes interfering with sell- the motivational dimension of his ing to and servicing customers. sales force into two categories. The “One of the most motivational first is what he calls “table stakes . . . things our salespeople heard that the things you need to do just to get day was when the supply chain guy people fairly satisfied. Then, on top stood up and said, ‘I understand your of that, another set of factors has to issues, and I’m going to fix them.’ be in place if you intend to increase In some ways, that was received far their motivation.” better than any type of sales com- pensation or special bonus we could According to Joannou, the latter cat- have put on the table that day.” egory “may not immediately sound Universal needs anything like factors that appear in 3 traditional motivation studies. They How can one best understand the Outlook 2007 include things like sales enablement factors that influence the motivation Number 3
  4. 4. of a sales force? One way is to upon only one dimension of motiva- return to the work of Abraham tion, and a comparatively low-level Maslow, a pioneering American one at that. psychologist who introduced, in the 1940s, a hierarchical understanding Caremark’s Joyner sees it this way: of basic or innate human needs. “Salespersons in general have more needs than simply getting a pay- Generally depicted as a pyramid, check. That is part of the reward, the original version of Maslow’s certainly, but once you have a fair hierarchy set forth five levels of compensation plan in place, then needs. The bottom four levels the real work of employee motiva- proceed through basic physiological tion begins.” In other words, the needs, a need for safety, for belong- carrot-and-stick approach—dangling ing and for esteem. Finally, at the financial rewards in front of a sales top of the hierarchy sits “self-actual- force—does not work very well once ization,” something Maslow called a person has reached an adequate a “growth need”—striving to live up income level and is motivated to one’s potential. primarily by higher needs. Central to the application of Trust Maslow’s hierarchy are two princi- ples—first, that people are motivated Above physiological needs on to satisfy the lowest level of unmet Maslow’s hierarchy is the human need, and second, that a satisfied need for safety and security. In a need cannot serve as a source of sales context, this need can also motivation. For example, a starving be understood as one involving the person can be motivated by the level of trust a sales force has in how prospect of attaining food; a well- it is treated and compensated. fed one cannot. Trust is a difficult thing to establish Maslow’s hierarchy is based on the within a sales organization when principle that human beings share it comes to the complex and ever- a set of universal needs regardless changing calculation of commis- of their culture and experiences. sions. The story of Canadian However, to apply that hierarchy telecommunications company Telus to a business setting, Maslow’s gen- Corp. is instructive in this context. eral principles must be expressed in Telus was suffering from the effects terms more relevant to a particular of inconsistent and manually inten- workforce. The figure below pro- sive incentive management vides that reinterpretation for a processes, dependent on multiple sales force, and shows four levels data sources that have little or noth- of motivational need. ing in the way of audit trails and traceability. As a consequence, the company’s salespeople were very Compensation skeptical about how their compensa- Looking at the reconstructed figure, tion was determined: Without reliable, one can see fairly quickly why detailed reporting on commission financial compensation alone is not payments, the compensation system sufficient to explain the motivations was a “black box” as far as the sales at work in a sales workforce. Finan- force was concerned. cial compensation—though not, strictly speaking, a physiological When trust is absent, sales profes- need—is analogous to the lowest tier sionals generally respond by creating 4 of needs in Maslow’s hierarchy. It is their own individualized shadow Outlook 2007 basic and important, but it touches accounting processes—most often an Number 3
  5. 5. automated spreadsheet or other tool technologies to improve the level they use to verify the accuracy of of trust, and to more closely align their paychecks and incentive pay- sales force behavior with not only outs. While it might seem that no the company’s sales strategy but also harm is done with such a process, its overall corporate strategy. When in fact it can be a drain on perfor- Telus implemented its new incentive mance and productivity. Estimates management system, the trust level of productive selling time lost to in its sales force grew. shadow accounting activities can range from one-half day to two days Two years after the system’s deploy- per month per salesperson. ment, the average time spent by salespeople on shadow accounting As Nortel’s Joannou notes, “Decreas- activities dropped from 40 hours per ing the amount of time a salesperson month to 5 hours per month. spends on non-sales activities is crit- The company’s sales team recouped ically important to raising overall 17,730 days of additional selling time productivity. Every minute spent by during the first year of deployment a salesperson verifying compensa- and 52,500 days the second year. tion data is one less minute available to meet with customers and close Productivity also improved. Telus deals.” What can be done? In Telus’s saw its total annual sales transac- case, the company adopted a holistic tions grow from 1,328 to 16,656 enterprise incentive management for two years after the implementa- solution driven by next-generation tion of its enterprise incentive A salesforce-specific hierarchy of motivational factors Fulfillment of potential: Having the supporting conditions in place that increase one’s chances for success Esteem, recognition, respect Trust, safety, assurance Compensation adequate for personal and family needs 5 Outlook 2007 Number 3 Source: Accenture analysis
  6. 6. management system. In total, the keyed to the transactional speed of company achieved a 103 percent the business. When a sales force is return on investment by the end selling business solutions and not of the first year of deployment and just products, the sales cycle is an astounding 3,316 percent ROI generally longer. by the second year. The shorter sales cycle for transac- tional sales, on the other hand, Esteem and a sense means that sales results must be of belonging posted at least once a month, and Moving further up the modified perhaps even more frequently. The Maslow hierarchy, we come to two posting itself becomes part of the principles that are closely linked in reward, as it is a form of public peer terms of motivating a sales force: recognition. Those results generate the need to belong and feel a part financial rewards as well, cycling of a group, and the need to be held back into the more basic elements in esteem and receive recognition. of compensation-based motivation. One important aspect of belonging Creativity is often the key to devis- There are often deep and esteem is the respect accorded to ing meaningful recognition programs individuals by senior management. that have an impact on individual structural obstacles But recognition from a peer group is performance and the bottom line. preventing sales- also critical to motivating the sales At one company we have worked force. with, the top 10 percent of the sales people from living up force is rewarded with the authoriza- Joannou describes it this way: tion to hire an administrative assis- to their potential. “There are two things that Nortel tant. It is an interesting case of the has never stopped or changed, even “rich getting richer,” since these top through challenging economic times. performers can then leverage the One is our annual sales conference, additional help to generate even where we bring our sales team better sales. And the turnover rate together, both to interact with each for that level of the sales force is not other in a forum setting, but also to just low; it is zero percent. do peer recognition. You get the sales team up there on stage and you Fulfillment of potential reward them in front of their peers. That is hugely important to them.” At the highest level of Maslow’s motivational hierarchy is what he The second thing Nortel has never called “self-actualization,” which we changed is what Joannou and his have expressed more simply as the team call their “circle of excellence.” fulfillment of potential. People have With this program, he continues, an instinctual need to make the most “we take the top 10 percent of our of their unique abilities, and they sales force and treat them to an all- advance toward that goal by having expenses-paid trip to a nice location. the conditions in place—which often One reason we’ve never cut that means acquiring new knowledge and program, despite all of the cost pres- skills—that enable them to take on sures, is because it motivates your ever-greater challenges. best performers to do even better because they want to be a member Understood in this context, it of this elite group.” becomes clearer why such a high percentage of salespeople around In planning social or peer motivation the world appear so unmotivated 6 programs, companies must bear in and disengaged from their work Outlook 2007 mind that such programs should be and seem to lack a commitment to Number 3
  7. 7. their organizations. The complexity To help its sales force succeed, the of the business environment often company rolled out an application means there are deep structural on a Tablet PC that is now used by obstacles preventing salespeople its field sales force. One of the func- from living up to their potential. tions of the new application is what the company calls a “condition cal- In a sales environment, the rapid culator.” It uses data mining tech- expansion of the basic catalog of niques—similar to the methods used products and services, the changing by Amazon.com to link one cus- technical environment, and the need tomer’s purchase patterns to those to sell in new ways to new cus- of other customers—to suggest addi- tomers place such a burden on the tional products the physician may sales force that their existing knowl- need based on what other doctors edge simply may be inadequate to have purchased, on that doctor’s the task. Psychologists tell us that in own past buying preferences, and response to this condition—known as on known ways that multiple prod- cognitive overload—people often ucts can help serve patients better. retreat back into modes of perfor- As a result of using this new tool, mance that make them more com- the company has seen dramatic fortable. And that can be deadly to improvement in its sales perfor- an organization that needs its sales mance, including a 400 percent force to meet new challenges by per- increase in cross-selling. forming in new ways. These sales tools, along with More sophisticated tools can help improved training, put workers in here. For example, the Accenture a position where they have a better Sales Workbench is a comprehensive, chance of overcoming cognitive over- technology-based tool that delivers load—and, more important, a better a salesforce-centric, role-based sup- chance of fulfilling their potential. portive environment that provides Going back to go forward the knowledge, content, legacy appli- cations, productivity tools, learning, In the face of complex performance collaboration and expert network environments and looming worker capabilities that enable salespeople to scarcity, sales executives must return take their performance to higher lev- to the basics of human motivation to els. The supportive environment cre- understand why financial incentives ated by the tool can also be tied to alone cannot hope to move the an enterprisewide performance man- behaviors of the sales organization agement capability that linksdifferen- in a direction that can support busi- tiated individual performance to ness growth. higher workforce performance and, ultimately, to high performance for When compensation is approximately the organization as a whole. equal among the sales forces of competing companies, those with A similar kind of sales workbench a better chance of achieving high has been used effectively by a major performance will be the ones that US medical products distributor to recognize the importance of such increase the types and numbers things as peer recognition and of products it sells to physicians. a trusting relationship between sales- Although the company offered people and management. more than 30,000 medical products, it found that most of its customers Companies must also be better were consistently ordering from attuned to the challenges of the com- 7 just a small percentage of the plex marketplace and of cognitive Outlook 2007 total catalog. overload; the two often combine to Number 3
  8. 8. increase revenues through improved impede the ability of the sales force productivity. He has more than 20 to achieve its potential. It is vital to years of industry experience covering both personal and corporate success all facets of business and sales man- that critical workforces are given the agement at Fortune 500 companies tools they need to succeed in a more such as W.W. Grainger and General complicated marketplace. Technology Electric Co., and has been named one is a key enabler here. Advanced of the Top 25 Sales & Marketing solutions now provide real-time per- Leaders in the World by the Corporate formance support for sales personnel Executive Board, Washington, D.C. at the time of need, and also provide links to companywide performance richard.j.bakosh@accenture.com management systems. Jason Angelos, the Los Angeles- By understanding how an integrated based Accenture Global Incentive and holistic approach to motivation Compensation Management lead, works—the importance of trust, of contributed to this article. self-esteem, of social recognition, of improved chances to fulfill one’s potential—traditional incentive com- Outlook is published by Accenture. © 2007 Accenture. pensation management strategies can All rights reserved. be rethought and implemented in ways that improve the performance The views and opinions in this article should of the sales force and help the entire not be viewed as professional advice with company achieve high performance. respect to your business. Accenture, its logo, and About the author High Performance Delivered are trademarks of Accenture. Richard J. Bakosh is the managing The use herein of trademarks that may partner for Accenture’s Sales Strategy be owned by others is not an assertion of ownership of such trademarks by Accenture and Sales Transformation practices. nor intended to imply an association between In this role, Mr. Bakosh leads a global Accenture and the lawful owners of such team—comprised of experts in sales trademarks. strategy, sales enablement, talent management and sales operations— For more information about Accenture, focused on helping large organizations please visit www.accenture.com

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