Not every employee is capable of selling products or services to potential customers.   The selling process requires an employee to possess a particular set of interactive and persuasion skills, as well as a compatible personality profile (garrulous, self-confident, unafraid of rejection, etc.).   While some employees enjoy the challenge, most want no part of it and only a minority are neutral about the idea.  For those tasked with a selling job it’s typically a reflection of individual personality that would generate success or struggle.

For compensation practitioners having the right person involved in the selling process can be more important than the compensation program itself, because dangling potential rewards in the face of the wrong person can be a waste of money and represents lost business opportunity.

It’s All About Motivation

Success in the selling process depends upon the right motivating elements aimed at the right employee personality.  To do this correctly within a sales compensation program requires the design to take that into account, to focus financial rewards toward whatever engages, whatever motivates the employee to perform in the manner the organization wishes.

Costly mistakes can be made when an organization assumes that all employees will react in the same fashion to the same stimulus.

Have you considered what motivates your sales employees?  Chances are that not everyone would have the same answer.

• Money:  Everybody’s first response is that all you have to do is offer the opportunity for a cash bonus and the employees are off and running.  But in chasing the almighty dollar, employees could also drive your company in the wrong direction – even off a cliff – because they may take the path of least resistance (difficulty) and greatest financial reward.  If those activities fail to align with what the company needs to assure business success, money is not only wasted but used to reward behavior that could be detrimental to the company.

Do you really want to reward the sale of a money-losing or low margin product?

• Mission:  Especially prevalent with not-for-profit organizations, many employees have a “fire in the belly” belief in what the organization espouses, be it products, services or awareness.  This internal value system often provides motivation enough to ensure concerted efforts.  In such a scenario, money is deemed less important (though not dismissed) as a motivator.  Employees are already motivated by the worthiness of the organization’s mission.

Helping others or helping a cause can be reward enough for some employees.

• Brand identification:  If you identify with the organization’s offerings and have a belief in what you are selling, you’re already halfway to becoming an effective sales representative.  For these employees the ingrained belief in what they sell is already present; they just need a  bit of training.

Employees are proud to be associated with a particular product or service.  They’re always wearing the logo shirt and are the organization’s biggest fans.

• Self-motivation:  Here the employee possesses an internal reserve of self worth that helps to make excellence its own reward.  It’s a state in which success in one’s endeavors is self-fulfilling.  The reward system for these employees is often a nice addition, but isn’t necessarily the prime motivating factor.

A certain level of performance would be forthcoming, no matter what financial rewards are offered.

• Challenge:  The mindset here is the joy of climbing the hill, especially if there’s a pot of gold at the peak.  Similar to self-motivation, some personality profiles relish a good challenge, and if you provide a reward for goal attainment, so much the better.

For such employees, the game is always afoot.  They enjoy breaking down barriers, solving problems and grabbing for the brass ring.

• Competition:  The fierce desire to be better than others; where winning (which means that others lose) is critically important.  Note: such employees might not be effective team players.

Sometimes this motivational factor is less about achieving company goals than simply doing better than other employees.  Like a loose cannon, these players may have their own definition of winning, which may not be synonymous with yours.

The takeaway point here is to understand what motivates your employees and then to place your rewards in front of them in a fashion that leads and directs their behavior.

Because if you design your incentive program with the wrong assumptions about what engages your workforce, you’ll risk missing your targets, misspending your financial assets and perhaps not even achieving the required level of success – regardless of the money paid out in rewards.

Designing A Better Carrot

When putting together the elements of your incentive program it would be worth your effort to focus rewards in a manner that recognizes the type of activity and performance you’re aiming for.   That sounds like a simple and straightforward concept, yet is all too often missed by plan designers.

• Change in behavior:  Providing an incentive opportunity should hinge on performance that you would not ordinarily receive.  Don’t waste money paying extra for what you can gain for free.

• Longer term focus:  Building relationships is often just as important as making a quick sale.  Repeat and additive sales are much easier to achieve than finding a new customer.

• Worthwhile rewards:  If the reward isn’t deemed worthwhile (“why should I put myself out for so little?”) the motivational factor will be diminished – leaving you with only employee self-motivation to rely on.  In such a case your incentive plan would be viewed as worthless.

• Reasonable targets:  If the employees don’t see their performance targets as “reasonably attainable,” their effort and engagement will suffer.  They should have an expectation that they can succeed and that they can reach their target.  Without that belief no incentive plan in the world will be able to stimulate the right degree of motivation.

To motivate sales employees to achieve a win-win solution, where they deliver the right performance and achieve financial rewards, while the company achieves operational success, you have to push the right buttons.  But always be mindful that it’s not as easy as simply waving a dollar bill.

When you’re on the international stage and designing programs to recognize and reward an employee’s extraordinary achievements, it’s important to understand the cultural implications of these programs.  Because not everyone thinks the same way.  Companies with a truly global operating mindset will take into account national and cultural differences that distinguish its widespread employee populations.  On the other hand, domestic-oriented organizations with international operations often struggle with their viewpoint, preferring a standardized strategy.

One size rarely fits all.  One size rarely pleases everyone.

You might think that the positive aspects of employee recognition programs are a universally accepted principle, but that’s only partially correct.  Critical distinctions do exist.  In some cultures / national identities the role of the team is such a core element of employee identification that seeking out an individual contributor for recognition would not be a welcome practice.  Some employees might be reluctant to step forward, not wanting to be pushed into the spotlight.

In other countries you will find that the perceived value of cash as a recognition award varies a great deal.

Case study

A former employer of mine once implemented a global Spot Award program for its worldwide employees – without including their international HR community in the planning discussions.  Finalized program elements and procedures covered employees in over 20 countries in exactly the same fashion.  The premise was to provide immediate (read that, fast) recognition and financial rewards (Spot Awards) for those non-incentive-eligible employees who demonstrated performance above and beyond their normal job roles.  Nominations for awards would come from the employee’s direct manager, though employees could recommend co-workers as well.

While the program was deemed a success in the US (defined by the dollars spent), it proved much less successful elsewhere among the company’s far-flung international operations.

Lessons Learned

The first problem was that Managers outside the US placed a much more conservative financial value on so-called “extraordinary” employee contributions.  Or put another way, the U.S. Managers were more generous in their payment awards than elsewhere.  The result was that the cash payments on a per-employee basis were widely skewed to the U.S. employee.  Notwithstanding the vagaries of the various currency exchanges, the international offices did not spend their allotted recognition reward monies as frequently or as generously as their U.S. counterparts.

I recall one scenario where a US employee received thousands of dollars for a particular project effort, while their European counterpart was given a non-cash award (recognition dinner).  This created more than a few awkward moments when the two employees shared experiences.

The second challenge was that many international employees did not want to be individually spotlighted by the recognition program.  They were willing to receive the award, but would prefer that the recognition remain confidential.  Given that Corporate had planned an internal communications campaign to highlight individual award winners, that reluctance proved quite a hindrance.

Compounding the preference for anonymity was the desire for team over personal awards, as individual employees proved resistant to receiving the planned fanfare or preferential treatment – especially in front of their co-workers (team members).

The bottom line was that the recognition and reward program recognized a smaller than anticipated number of non-US employees, less reward money was spent per international employee, and Corporate Communications was hard pressed to find international employees amenable to being highlighted for the program.  Not exactly what the program designers had intended.

Corrective action

The solution seems straightforward.  If a global program is to affect all employees, then potential national or cultural distinctions among groups should be addressed well in advance.  Taking that step would mean including representatives from those groups in the design and communication phases of the project.  However, such a simple step seems a difficult one to take for many corporate global plan designers.  Why?

When they have the bit between their teeth developing a program that affects the majority of employees, management is often reluctant to change course to include the differing sensitivities of small populations, especially if those populations do not speak with one voice.  What they prefer to do is have local representatives accept the global directives, or at best “tweak” the round peg into the square hole.

How does that approach work for you?  I can tell you that such a tactic doesn’t work for your international employees.

The time will come when you find yourself between a rock and a hard place at work.  Your ability to produce project deliverables will be challenged by staff shortages, multiple projects simultaneously coming due, or the requirement of particular skill sets not possessed by your existing personnel.  And while you’re stressing out those problems Senior Management won’t let matters slide until circumstances are more convenient.

You need help.  You need it now.  But do you need a hired-gun professional, a consultant?

Reaching Out For Help

You could try to find a temporary Compensation Analyst to run some numbers for you, and if that solves your immediate dilemma you need not read any further.

However, if your challenge is deeper and broader than simple spreadsheets, you might seek out the services of a seasoned expert, one who can provide hands-on advice and counsel, who can take data from the analyst and advance your agenda: What does this information tell us?  What can we do now?  Where are the risks?  What corrective strategies can be employed?

The following circumstances are examples of when the use of outside expertise can be beneficial:

• Technical knowledge is not currently available to existing staff (i.e., international, executive, expatriate or sales compensation).  This may not be the time for on-the-job training.

• When the current staff is overwhelmed and you need temporary assistance to take charge and drive your multiple project(s) forward.

• Interim replacement for absent staff (separation, leave, etc.).  Someone to fill the gap, holding things together and advancing the agenda until the replacement is secured.

External professionals have the experience and broad perspective to impact your business, not simply report on it.  If used properly and in a focused manner subject matter experts will save you time, money and sleepless nights.

Caution: many professionals currently between jobs (“in transition”) consider themselves temporary consultants while continuing their job search.  Dependent on your time line these individuals may not be able to provide the focus or dedicated support (staying power) that you need.  They’re still looking for their next permanent job.

As you would expect, specialists cost more than general labor, on account of their broad and deep subject matter capabilities that are available “on demand.”  However, consider whether the expense is justified before you commit.

• An improper one-time “fix” will cost a great deal more over time (dollars, morale, turnover, training etc.) than if the problem was properly corrected in the first place.
• Consultants have the seasoning and long service expertise to look past the figures to the root causes and underlying issues.
• Someone who has a broad background working with diverse industries, geographies and employee segments can provide a richer perspective as to how best to approach your particular challenges.

Or Choose To Go It Alone

Of course you can decide to do the work yourself.  Perhaps you don’t have the budget, have never gone “outside,” or simply feel defensive about admitting you need help.  But that “little engine that could” strategy can present its own challenges.

• Your staff may be slow to focus on projects additive to their full time jobs, plus they will need to overcome numerous day-to-day distractions.  Project time lines will be drawn out.

• Internals tend to focus on easy-to-achieve short term improvements, like low hanging fruit, vs. what core issue decisions are needed to affect a permanent solution.  This is not solving the problem, but shoving it into a closet – with the other skeletons.

• Managers are often in a hurry to check off the project (problem) as completed (fixed) or “addressed” – the so-called “check mark” management style.

• Internal staff is often restrained in their thinking by experiences limited to the What and Why of their organization.  They may not be able to see out of the box into the wider universe of possibilities.

Help Needs To Be Monitored

If you have decided to bring in outside assistance, exercise care that you utilize them effectively to gain the maximum value:

• Proper scoping of the project saves time and money.  Understand the challenge you need addressed, as confusion here leads to greater expense and longer time lines.

• Scrub your data before handing it over; otherwise you’ll be paying for “grunt” work easily completed by inside staff.

• Monitor work progress, lest you end up with charges for unanticipated (though not specifically prohibited) work.  The grey areas will cost you every time.

• Avoid consultants who are themselves incented by billable hours; they may encourage additional steps that render your project(s) more complex / expensive.

• Be cautious of fancy report formats and four-color charts; you’re paying extra for the fluff, which can sometimes disguise a scarcity of core material.

Seasoned external experts have the advantage of concentration; they focus on the project at hand, while avoiding the trap of non-productive time (socializing at work, interruptions, meetings, other distractions from the work at hand).

So if you need a bit of help to address your Compensation challenges, to help you achieve your objectives in the face of staffing issues and simultaneous projects, give some thought to calling for roadside assistance.

It’s fairly common these days to find articles written by those who advocate increasing the eligibility of employee incentives.  Their recommendation is to push inclusion further and further down the organization’s hierarchy.  The argument is that all employees affect a company’s success, that every employee will chase the almighty dollar of variable pay, and that the opportunity for ever larger rewards will motivate them to do great things.  All of which would in turn deliver improved financial results for the company’s bottom line.

Maybe.

And maybe it’s not such a good idea after all.  Perhaps it’s a bit of a crap shoot as to whether higher compensation costs (which would be a certainty) will result in improved financial gains (possible, but not guaranteed).   Let’s take a look at the challenges to be faced when you consider a broader eligibility for your annual incentive program.

What’s The Plan?

Start with a re-examination of the basics.  What do you consider an incentive element when designing a compensation program?  My definition is a reward for performance that goes above and beyond the norm, beyond what is expected.  Thus it shouldn’t be a reward for performance that would have occurred as a matter of course.  The intent for offering an incentive is to prompt a change in behavior, to get employees to do something they wouldn’t ordinarily have done, and to get them to do it because they have been offered a financial reward.

That should be the plan.

And because these objectives are noteworthy, you would expect that they would differ from year to year as the needs of the organization evolve and adapt to changing business conditions.  This emphasis on annual objectives reinforces the intent that incentives should be designed to reward effort above and beyond those duties listed in the job description.  They should not be repetitive, year upon year.  That’s what the job description is for.

Incentive rewards should also not be provided simply because an employee performs their job well.  That particular carrot should be the role of the annual merit increase.  In fact, such an exercise would be considered “double-dipping,” paying for the same performance twice.  You should not be using an incentive as an inducement to get employees to perform their expected duties.  Again, that’s paying twice to reinforce the same behavior.  It’s also using compensation to replace the leader’s own responsibility to manage their staff.

Some would consider this using pay as a babysitter.

Is There An Advantage For The Company?

When deciding on whether to add a variable pay opportunity to an existing base salary compensation model, you need to ask yourself, “what will the company receive in return for the increased costs (variable pay) of an incentive program?”  If you are planning to increase your targeted compensation costs by 5% or 10% of the base salaries of an affected group, how will you answer the ROI question?

Caution:  You had better provide a business (financial) rationale, and not subjective phraseology like “survey says” or “everyone else is doing it” or even “it’s the right thing to do.’  Management tends to frown on such trivial rationalizations.

It’s also worth noting that employees lower in the hierarchy have a greatly reduced line of sight between their actions and business success.  This entails having to create quantifiable objectives for performance (you are quantifying, right?) that should integrate vertically with department, functional and / or organization objectives.  If you don’t integrate what you’re telling employees to do, you may find yourself paying out incentive rewards when the company as a whole has not been successful.

As a counterargument to the eligibility question I’m often asked about Gainsharing programs.  These initiatives can be a useful method of introducing incentives to select employee groups who have a direct line of sight to potential savings.  They can affect real change.  However, successful plans eventually kill themselves off as viable gains are achieved (low hanging fruit) and payments decrease after the easy pickings are collected.

So, to recap, let’s review the business urgency for lowering incentive eligibility to below the management ranks.

• Is the employee line of sight (performance / business results) direct, or remote?  If remote, what are you paying for?

• Can you quantify the expected ROI?  The wrong answer here suggests a giveaway.

• Can you balance the increased compensation costs against hard financial gains for the company?  Are the bean counters nodding their heads?

• Would the variable pay become strictly an added cost, or would any portion of base salary be at risk?  “No pain, no gain,” or “no risk – icing on the cake?”

If you have a reasonable doubt on any of the above points, I suggest you think long and hard before implementing such a program.  It would be very difficult to dig yourself out of that hole.

You’ve seen the company’s search ads and heard the pitch from your recruiters; you offer competitive wages to qualified candidates.  That’s got to be a strong hook for attracting talent, right?

Big deal.

Your pay structures are regularly updated based on competitive market trends, so the opportunities you offer employees are aligned with your retention and motivation strategies, right?

Not enough.

Most employees presume that their company is already meeting (or aspiring to meet) the goal of competitive pay.  Companies routinely advertise the practice (“we offer competitive wages”) and candidates in return expect this of potential employers.  But what happens when your goal of offering competitive pay is finally achieved?  Are employees grateful?  Can companies rest in their efforts to attract, motivate and retain?

I’m afraid not.

What Doesn’t Happen

What doesn’t happen when you offer competitive pay is that your recruitment problems do not magically disappear, your employees won’t be satisfied and your compensation programs have achieved little more than being average – and isn’t that a “C” grade in school?  Is that how you want to position your compensation strategy?

As far as aspirations go, it’s only middle-of-the-road.

If your company does pay “the going rate,” that still means that approximately 50% of the companies out there are paying more than you.  That’s what average gets you, with half doing more and half doing less.  Is that what your company aspires to achieve?  You won’t see that fact pointed out in recruiting campaigns.

No one quits for less money – so all you’ll hear through the grapevine is about how so-and-so left and is now making more somewhere else.  And as it’s human nature to hear only what supports your own notion  –  your employees won’t pay attention to the broader rewards package, just the points that confirm their opinion that your company isn’t paying enough.

The only way to avoid this scenario is becoming the premier paying company in your market or industry – and can you afford that cost?

Lest we forget though, it’s important to differentiate between having a salary structure (grades, salary ranges and midpoints) that provides competitive rate “opportunity” and actually paying employees at those rates.  Some describe this as whether the company is “walking the talk.”  I recall a client who was boastful of the fact that their salary ranges were continually adjusted to mirror market rates, but was later embarrassed to discover that their actual pay practices fell well below midpoints.  The company said one thing by their pay structure, but did another by the way they implemented that structure.

For their own part, employees relate to the pay they receive, not the midpoint of a salary range or other such declared “opportunity.”  For them the company’s “competitiveness” can be more illusion than fact; especially if they’re experienced and have been with you for awhile.  Thus the company needs to keep its focus on actual vs. opportunity pay.

Why Don’t Employers Pay The “Going Rate?”

Typically it is not an organization’s strategy to avoid paying out competitive rewards, but more likely a series of practices that have evolved over time.

• Some candidates will accept a lower employment rate than should normally be paid for their knowledge and experience, and managers tend to view this as a cost savings.  Though it is more like putting a skeleton into the closet and hoping it doesn’t jump out at you down the road.  One day these employees will change their minds.

• Once you’ve started down the slippery slope of paying some employees below market rates the practice is soon compounded by internal equity.  Managers don’t want to pay similarly qualified new people more than existing employees, so the new hires can be offered below market pay.

• Pay-for-performance systems have a hard time keeping up with the increased marketability of employees.  A minimally qualified employee hired at the minimum rate will gain knowledge and experience (and thus marketability) faster than the company’s annual merit system can recognize.  This is compounded when you have to hire a qualified worker and discover that the market requires you to pay more than what you’re paying your more experienced employees.

So, what’s the answer?  Management won’t agree to become the premier payer in your area, so you should consider instilling more flexibility into your pay practices.  Consider targeting key jobs (highly skilled, difficult to replace, mission critical, etc.) and make sure those jobholders are well paid for the market.

And don’t forget to pay attention to your customer-facing employees.  To many a customer, those folks are your company.

Other positions you have deemed less skilled and more easily replaceable could continue with your “competitive opportunity” strategy.  This approach is akin to ring-fencing key talent, protecting them against poaching while recognizing and rewarding those with the most potential impact on your business.

Bottom line?  Be careful when you claim how your company provides competitive wages.  You may not be correct, but if so – big deal.