Employee Sales Bonuses

I like to offer my employees $ bonuses for their sales. Right now I have generous weekly bonuses for x $ amount of net sales for each individual rep. I also have a spinning wheel that I bought off ebaY over the summer that has $5,10 & 20's tacked on to it with some blank spaces in between. They spin the wheel on each deal they write for some quick cash and it's been a lot of fun. Some spin that sucker 4 or 5 times per day!

I'm thinking about splitting the guys and gal into two teams (I have 6 reps right now) and having a competition between the two. Perhaps running it for the month with each person on the team needing to qualify with a minimum avg. $ amount each week based on 4 weeks. If one person on the team does not qualify, this would disqualify their entire team.


Looking for some ideas from you guys on fun and productive bonus ideas...

What works and what's too much that would make my reps rely on or come to expect things on a regular basis. I don't want to bury myself either.

Anyone? -bluenote

What about taking the winning team out to lunch/dinner or some event? -Houston

The wheel is a fun idea. Does the wheel have prizes and cash or just cash? For your team competition you could put bigger prizes [spa, dinner, theatre....] and bigger cash amounts. -Gilbert

Houston,

Outside of the office, I do not have any type of social relationship with my employees. It's best that way for may reasons.

Sending them to dinner w/ tickets to an event is a good idea though.


Gilbert, The wheel has been a lot of fun. It has a few blank spaces on it and the wins are all cash.

It's not a whole lot of lute and nothing in comparison to their paychecks... but none the less, it's some quick cash for writing a deal and it buys them nice lunches and whatever else throughout the week.

Thanks for the suggestions guys! -bluenote

You didn't describe the office completely: are there non-sales types assisting your SRs to be successful?

If so, I highly recommend $50.00 gift certificates handed-out in front of the team when someone is "over-the-top" in their support efforts. One of the ISRs got the bulk of these simply because she was frequently responsible for a large chunk of the $55K in monthly GP on which her SR was commissioned. I had given the gift certificates to the Admin Mgr as well as the character who took care of mfr's rebates (in our business, that might represent our GP).

Suppliers are always good to work with for spiffing the SRs and there was usually a way to find a TV or peripheral for performance in a focused area of the business.

Hope this helps ...

Good luck & Good selling!
Pat -OUTSource Sales

In my experience you change this and your sales will go up by some 30%.

Without this factor your sales folks know that you regard them as a means to making you rich even at their expense. You demonstrate to them that they're expendable.

In my experience, every business problem starts out as a personal problem. Salespeople underperform because of trouble at home. Wife ran away with the milkman or husband caught red-handed in the local brothel.

And to help them to eliminate these problems, thus helping them to perform better, we have to get to know them as human beings not merely as employees.

Also, instead of creating two teams and making them compete with each other, I would create one cohesive team and make it compete against its own previous best.

And to make sure that it's a real team not merely a group of individuals sharing an office, a toilet and coffee machine, I would remove individual compensation and reward the team as a unit.

Human behavior expert Alfie Kohn has published numerous works decrying reward systems. His writings include "Why Incentive Plans Cannot Work," Harvard Business Review, September-October 1993, and "For Best Results, Forget the Bonus," The New York Times, Oct. 17, 1993.

He is also the author of "No Contest: The Case Against Competition" (Houghton Mifflin, 1992), and "Punished By Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes" (Houghton Mifflin, 1993).

The essence is that when you remove the pressure of internal competition, then people perform a lot better. As a difference, I regard external competition as a challenge but not pressure.

Thoughts?

BD -Bald Dog

The fundamental concept behind compensation is "reward for performance". When you do this for the team, you risk alienating the real sales super stars. AND, as long as there is competition out there, those super stars will want to earn top dollar ... they will break and run at the first offer from the competitor with a comp plan which will generate more commission for their individual efforts!

By definition, team compensation rewards mediocrity: "socialized comp". By providing an inflated share to an under-performer, the motivational aspect of commission is lost. Consequently, the management role becomes one of babysitting the comp plan every month when the numbers come-in.

The beauty of a truly focused comp plan is that it rewards the performance which is tied to company's current objectives. It must be UNcapped. The over-performers must be regaled as if they were gladiators!

The real thoroughbreds on the team thrive on their monthly commission cheques. The "tier-2" SRs aspire to earn meaningful commissions. In my Xerox days, the big winners were driving Vettes and Bimmers: everyone else wanted "into President's Club".

It doesn't take an accountant to tell you that team compensation is not designed to optimize the individual's income. Accordingly, I would counsel those SRs who aspire to greatness that you judge a job offer by the magnitude of the role presented: all-in, what's in it for you (and your family)?

Once again, I do NOT read such business publications. The quotes provided are infuriating: "Why Incentive Plans Cannot Work"! You need to remember that these outrageous statements are made in order to sell their books: After all, how many companies out there have proven that the motivational side of commission has been at the root of their success! "Cannot Work" ... they HAVE worked and ARE working!!!

In my experience team compensation is something to be avoided at all costs. In my years of sales management and now in my consulting practice, I would NEVER suggest implementing such a plan.

Good luck & Good selling!
Pat -OUTSource Sales

Blue Note, you said, "Outside of the office, I do not have any type of social relationship with my employees. It's best that way ... Sending them to dinner w/ tickets to an event is a good idea though."

My experience tells me that it is better to keep some distance. I've had the team out for functions (dinners, theatre, etc.) but it gets unwieldy and tends to lose the personal touch. This especially if the budget doesn't permit inviting the "significant others".

Consequently, I much prefer giving AMEX chits for dinner, theatre (etc.) or hockey/baseball tickets.

After all, there is NOTHING more motivational (in both directions) as the spousal unit. I've learned that it's critical to keep them involved at all costs. One example, around mid-year, I would send out tourist brochures for that year's President Club location to each of the spousal units. A personalized note would be included which explains club to them. Then, in the 3rd quarter, I would send out to the spousal units, another spiffy enticement. Monthly through the 4th quarter, more would go out each with new information on what to expect at President's Club. This always had the desired effect.

Good luck & Good Selling!
Pat -OUTSource Sales

OUTSource Sales,

We just have different approaches. You go for superstar individuals. I go for a superstar team.

A superstar team doesn't need superstar performers. And a group of superstar performers don't automatically make a superstar team.

Why?

The members of a superstar team wake up in the morning looking forward to contributing to something bigger than they could pull off individually.

Many superstar performers wake up in the morning only because they get paid for it.

In the team's case it's the passion, enthusiasm, energy and drive to create something amazing.

In the superstar's case it's another day, another buck. If they pay me, I do it.

> By providing an inflated share to an under-performer, the motivational aspect of commission is lost.

But why the cricket would I hire someone who is solely motivated by money?

I may look at it from the wrong angle, but to me a steady, loyal plodder is more valuable than a whimsical uncontrollable superstar who gives me the attitude and threatens to quit every week.

Given the right help and support, the plodder will improve, but the superstar is a disaster as is.

So, what can I do with the plodder? Assess his natural talents and play him to those talents.

BD -Bald Dog

First off, Bald Dog, there are no "wrongs", so, you and I are throwing about views based upon our personal experiences in sales/sales management.

With that said, you assume too much: having "superstar performers" (your term) on the team makes for a true sales environment in which some lead and others follow. There are no negatives (for example) to have two SRs blowing away plan and two SRs making plan (with some peak months).

I had no under-performers on my team.

The next massive disconnect wrt "superstar performers" relates to your perception of them as being, "whimsical uncontrollable superstar who gives me the attitude and threatens to quit every week." I have NEVER had such an experience either as a peer SR on the team or SM leading the team.

Nextly, you sent me reeling with your comment, "But why the cricket would I hire someone who is solely motivated by money?" The sales compensation plan is designed to motivate against the company's objectives (units, margin, share, growth, etc.). If a SR earns commission against those criteria, how can there be an issue? I managed senior individuals with sufficient personal depth to see their earning potential in the right perspective. In each instance they were consistently strong contributors to the team at large.

The role of the SM is to ensure that the atmosphere is one in which every single member is superbly positioned to achieve their personal goals. During sales meetings, the team would be asked about their wish-list in terms of training beyond sales skills. After a skills inventory and personal assessments (based on time together), perhaps, training was required to bring-up the business or sales skills. Or, perhaps, sessions with management to gain a keener insight into how the company ticks.

In my view as SM, it was my mission to both:
1. bring the sales leaders to another level (eg. teach them how to "earn more net without selling more gross"); and,
2. bring the entire team to a higher level of productivity;

I can say, in all honesty, that I managed the team by knowing the individuals. No one on any of my teams would say that they were either coddled or ignored!

Good luck & Good Selling!
Pat -OUTSource Sales

"The essence is that when you remove the pressure of internal competition, then people perform a lot better. As a difference, I regard external competition as a challenge but not pressure." - BaldDog

What and how one defines and internalizes external factors and how these things effect behavior is an important consideration personally and with a sales team or individual. I've worked with people wired to respond to individual incentives for productivity as well as those not wired to that response - other things move them.

Removing internalized pressure is important and necessary for most people to be successful - my experience is in agreement with yours, BD.

Likewise, I've watched a team spirit illuminate a collection of people to achieve success and I've seen it not trigger that kind of response in other would-be teams.

I continually seek people who know what they want in the terms they want those things defined. "Team" is a term that is used inappropriately many times - a basketball team obviouisly functions in a team way differently than a track and field team. BUT highly motivated individuals on the same team or in the same unit can influence one another in a positive or negative way.

Long term commitment and personal growth is something I value highly and look for in people - super stars will come along as well as less productive but secure as well as team spirited individuals. I find all of that fascinating.

MitchM -MitchM

I think the other difference is that my sales experience is limited to selling various professional and consulting services, which means in most cases the sellers are the doers. What that means is the selling is only one aspect of competencies these people must have, and even that kind of selling of professional services is somewhat different from selling tangible things.

But having read your last post, I think our views are closer than we first thought.

BD -Bald Dog

BD, I'm not sure that we're lock-step on this one. Simply put: I do not believe in the concept of "socialized commission". It goes against "every fibre" of a true SR.

Typically, when the team is commissioned, it is to brush-off (cover) an performance concern (eg. start-up, product launch, penetrating new geography/industry, etc.). The singular reason, here, is to defray potential downside of throwing people at the issue. I have also seen marketing debacles handled by altering commission for a specific (short) period.

I wonder if it concept of your sort of team commission program goes against the rules set-down by both IRS and RevCan? In both instances, the commission portion must be "at-risk" to the individual taxpayer.

Mitch seems to have hit the nail with his comment about having a of "team spirited individuals".

And, to clarify for the record, my offering has generally included PS but not delivery (we've always used individuals with specific talent to deliver).

Good luck & Good selling!
Pat -OUTSource Sales

Hi Pat,

Neither do I in general. I think one difference is that for your the smallest part of the sales force is the individual. For me it's the team.

I've also just found this blog entry that explains my approach.

And commission is a lagging indicator.

But indicators like...

Employee Happiness Index
Hand Written Card Index
Accounts in Pursuit

Are leading, predictive indicators.

As a sales manager, I can increase the Employee Happiness Index, so increase everyone's performance. I can create an environment in which people naturally want to learn and grow. Mediocre people naturally shape up or ship out, and they do it very quickly. In my experience, people who don't want to learn and grow hate the company of those who do.

I don't think so.

Yes, but my thought is that individual compensation kills teamwork.

According to various stats, the annual attrition of sales folks is 43%. I don't know how much the commission structure contribute to this. But if I abolish the commission structure and pay sales folks the same way as the others are paid, I can reduce this number. At selling professional services, where clients have long-term relationships with their consultants (salespeople) this is vital.

But the tolerance for attrition may be higher in other industries where sales folks sell the stuff and move on to the next prospect. And my experience in those areas are pretty limited.

In the meantime, happy new year to you and all the other forum participants.

BD -Bald Dog

BD, where, I acknowledge that we're not trying to "convert" one another, I'm hard pressed to avoid comment.

These threads tend to get off-the-rails with statistics when they're used like this, "According to various stats, the annual attrition of sales folks is 43%". The number means nothing because the source is not available, it doesn't specify which segment of SRs it portrays, and it isn't put into the perspective of the discussion topic (i.e. sales bonuses).

I'd much rather hear, "... in my experience, turnover has been...". In point of fact, in my personal experience, turnover NEVER been anywhere near that number (other than one "bag of razor blades" which I'd inherited). The point being that the implied turnover was based solely on lack of performance and was a management topic (not a function of the compensation).

As to my comments about IRS/REVCAN, don't be so sure. If I were you, I'd put the question to my accountant. If IRS were to do an audit on sales compensation programs, it is NOT a leap to have them interpret a diminished risk for team-based versus individual compensation. And, initiating a review of their treatment of such cases.

My experience runs the gamut in terms of length/complexity of both cycle and client relations. So, I'm not sure that I agree with the comment about, "... the tolerance for attrition may be higher in other industries". My point being that such attrition is seldom a function of the compensation.

On the balance of your post, I must admit that these indicator topics mean very little to me: I work so closely with the team that impersonal surveys and indices which, by definition, measure after-the-fact are impediments to strong relationships. It's been my experience that where peers were interested in such surveys of their teams, it was to diffuse an HR issue which they were suffering (i.e. the team has revolted and the SM is under the microscope).

This is my first post for 2008. I'm hoping to be able to continue throughout the year ...

Have a great one!

Good luck & Good selling!
Pat -OUTSource Sales