I visited a dealership the other day and a salesperson told me something their manager told them. To be fair, the salesperson was probably complaining in frustration about the difficulty of the market. But the manager told them to think outside the box because “anything is possible.”
Clearly the salesperson wasn’t making their targets. But what the salesperson received from upper management was basically this message – go forth and sell (you moron) and stop complaining. It’s not the market, it’s you. No coaching, no help. Just do It. You know, the Nike way.
It reminded me of this quote: “If anyone ever tells you anything is possible just ask them to dribble a football”.
Asking a salesperson to deliver more revenue in this market is sometimes like asking them to dribble a football. For much too long, the success of salespeople has predominantly been defined by one simple metric: sales revenue. But is this really meaningful any longer?
The recession is showing that even really great salespeople calling on really qualified prospects will still encounter delayed deals and longer sales cycles. In other words, the main metric by which salespeople are measured (sales revenue) is now largely out of their control.
The Standard Commission Model
Lately, a lot of dealers are wondering the same thing: “How should we manage, reward and track the performance of our salespeople?”
Before the market turn, the most popular commission model Breakfront encountered was a dealer paying their salespeople a commission on total revenue (for the record, that’s a very bad idea). Over the years, Breakfront recommended these:
- If you were missing a business system in between your accounting and design software, a sliding scale of commission based on gross profit was applicable. Of course, odds were you were missing granularity and important elements of your job costs, but it was light years ahead of paying a commission on total revenue.
- If you had the business system in between your design and accounting software, a commission based first on job completion and then on gross profit was even more effective.
Many dealers today are opting for slightly modified versions of these commission models with mediocre results. Every dealer seems to have the killer model they just dreamed up the night before, and then, after I talk with them a few months later, it’s this issue or that issue – but overall it failed to solve the problem of delivering increased sales.
In the end, it’s the same old commission model underneath it all. That’s because they’re all built on the only metric our industry seems to know: sales revenue. Dealers keep calling their plan something different, but we all know it’s the same thing and it isn’t working.
It’s Ugly Everywhere
Across the board in just about every industry, salesperson compensation and bonuses are down. Sales expenditures (as a % of Annual Revenue) are down. The percentage of salespeople achieving their targets is down and in a recent study I read of larger companies, 1 out of every 4 companies expect less than 50% of their salespeople to even make their targets this year.
Yet even in the midst of this, dealers raised the revenue targets for their salespeople.
The Perfect Storm
So salespeople’s quotas have increased. Economic activity has decreased. And marketing budgets have been reduced. Salespeople are being asked to deliver more than ever, in a down market with little or no marketing help.
You can’t help but to think of Dr. Phil asking, “So, how’s that workin’ for you?”
As you are reading this right now, there is a cabinet dealer near you that still thinks they can expense control or cut their way out of this recession. We promise you that this approach is a formula which will seal your long term fate and close your doors – permanently. The market is ruthless right now. You have to be more creative than that.
Dealer headcounts continue to be reduced in the worst possible place: Sales. Dealer’s budgets continue to get tightened in the worst possible place: Marketing.
The market has changed and the dealer’s overall approach and response has been slow at best. Dealers still hoard cash for a rainy day and fail to make prudent investments in technology, marketing and sales. Meanwhile the home centers are aggressively investing in all of these things to better compete with dealers in the new world.
Dealers have stopped doing the things which made them successful in the early years when they were hungry. They’ve stopped taking the calculated risks. Taking a risk now is best compared to putting your very existence on the line.
Worse yet, salespeople are leaving in droves for other ventures because from their perspective this is an environment where they cannot win, no matter how hard they try. It’s sad, but environments like this always encourage your best people to leave first.
That’s because how their success is measured is tied to one very old concept of measurement: sales revenue. The one metric they cannot control. The one metric they cannot live up to in the Perfect Storm.
Sure, there are still naturals that defy the odds. But we all know there’s not many of them out there.
Face it, the rest of your sales team is struggling.
Something Different to Think About
In sales, the golden rule to beat a slump is to get back to the fundamentals. For salespeople, that might be better protecting their “golden hours” of prospecting or selling. For management, it means better measurement and more coaching.
So let’s get away from sales revenue for a moment as the only measurement tool in our tool belt. There are many great selling behaviors dealers need to start measuring and encouraging. Here’s just a quick list to get you thinking:
- Selling to new accounts
- Selling new products
- Farming business from existing customers
- Cross selling / up-selling
- Avoiding excessive discounting
- Selling higher margin products
- Utilizing the company’s sales process
- Utilizing the company’s lead & opportunity tracking system
- Sharing best practices with the sales team
- Accurately forecasting business
- Capturing customer success stories and creating evangelistic customers
- Where are these behaviors rewarded in your incentive program?
Measuring and rewarding the activities above can help make great salespeople by instilling the kinds of behavior in your sales force which count. And although increased sales revenue may be out of their hands at the moment, rest assured they will gobble additional sales the moment the market allows them to with this kind of consistent selling behavior.
The number one way to improve your sales team’s performance is regular coaching. Get away from beating the revenue dead horse and focus instead on plans that reward the kind of selling behavior necessary to survive in this market.
Nail these and the revenue will come.
Things to Remember for Your Next Compensation Plan
- Keep it simple: If you can’t explain it to a teenager in less than 3 minutes, it’s too complex
- If you don’t measure it, you can’t manage it
- If you can’t manage it, you can’t improve it
- Consider rewarding higher margin products more than lower margin products
- Competition within your sales team can be positive (and fun)
We work for the money, but live for the strokes. Remember that not all rewards have to be financial. Recognition and reward programs can be more than simply monetary.
Travel awards, merchandise certificates, gift cards (i.e. Starbucks, Amazon, etc.), vacation time, and individualized rewards (i.e. rewards that require thought and some basic research about what your employees value or love as hobbies) can enrich the work experience and give meaningful impact when saying “Great Job.”