In Callidus news this week, a contributed piece by our own Lorna Heynike was published on DemandGen Report. The article notes that CRM systems rely on subjective data that is entered by the sales team. Managers can see how employees are really performance with a sales performance management which provides accurate, real-time performance data. FOXBusiness announced that we are presenting at CFO Magazine's 17th annual CFO Rising Conference.  PrudentCloud covered the topic of vendors feeling the heat to come up with their own version of SaaS application.  It was noted that Callidus Software have created an alternate line of SaaS products.

In EMEA news, Wall Street Journal announced that Dutch, British and Icelandic officials have been wrangling for nearly a year over a compensation deal in which the island nation would repay the U.K. and the Netherlands $5.3 billion for bailing out depositors in a failed Icelandic Internet bank, Icesave.  Wall Street Journal also covered the projection that Citigroup analysts are forecasting structurally lower compensation ratios.

Question

My company is considering instituting a plan where all team members would share in a commission on sales made. I’m looking for ideas – how is it structured, are all sales included in the group commission, etc.

Answer

The key principle that comes to mind here has to do with how the sales are made. Do the team members depend on each other to be successful? If they do, for each sale, then a team incentive where they have a single team target and a single team actual result, all receiving the same payout, makes great sense. If each team member has his or her “own” sales, and also supports the effort of the team, then an individual sales goal and a team goal may both be indicated (usually with a higher weight on the individual goal).

Investing in new technology is not only necessary, it’s inevitable. Technology is all around us – we rely on it to help us survive everyday life.

The only problem is, technology is expensive and becomes old news fast. Technology becomes better and better almost by the second. By the time you walk out of the Apple store with your brand new iPod, the next generation is already being put on the shelf. The fact of the matter is: Technology is cool, innovative and helps us do all the things we want, faster, better and easier.

It’s important to make sure you’re buying the technology that you need. It must be able to perform the tasks you want it to do; otherwise it wasn’t worth the investment.

Here’s how I learned this lesson the hard way:

About two years ago, I was finally able to upgrade my cell phone. My previous phone was a simple, ancient flip phone with calling and texting abilities, and could play music which I never figured out how to do. This time I wanted a hip, innovative cell with navigation, web browsing, email and a simple way of accessing my music from my phone. Without doing my research first, I decided to buy a fully touch screen phone that had all the amenities I wanted. Plus it was only $50 compared to the competing $200 smart phone. Perfect!

Not exactly.

The touch screen was a pain to get use to. I’ve wasted over 1,000 minutes on pocket/purse dials. The navigation is shoddy and seems to never work when I really have no clue where I’m going. You’d think I could rely on the phone’s web browsing ability, but no. I can barely check Facebook updates let alone search the web for directions. The email "access" was useless. I could only receive email updates. As for the music, I had the choice of re-buying all of my music through my phone or buying a PC. Unfortunately the phone wasn’t compatible with Macs :(.

So now I only use my phone for calls and texting. Back to square one. I should have stayed with my old phone. At least I would have saved $50.

Come to find out, if I had just bought the $200 phone, I could have easily gotten everything I ever dreamed for in a phone. I wasn’t willing to take the plug because (without doing any research) I thought my $50 phone could do all the same things for a cheaper price.

Businesses make this mistake all the time when they are looking to invest in a solution. Understandably, they don’t want to pay more for something they can get at a cheaper price. We all feel this way. But, like I explained in my example, it’s easy to get duped. You need to dive deep and seek the real value in the solutions you choose to invest in. It’s worth spending more to solve your problems completely. Don’t waste money on a solution you’ll end up throwing away. Don’t waste time implementing a solution that it isn’t right for the company.

The lessons to be learned:

1. Do your research! What does a product or service really have to offer? Are you going to get what you want or what you’re paying for?

2. Make the right investment, not the cheap investment. What’s the point of spending money on technology that won’t work for you in the end? That’s like buying a pair of trousers when you need a sweater just because they were $10 cheaper.

Especially when budgets are tight, businesses seek the least expensive investments with highest amount of return. Thorough research will help you understand the true value of a solution and help you decide if the solution is worth opening the check book for.

STRONG LEADERSHIP: Without guidance, the sales team has no direction. They must know exactly what they need to do to hit business goals. The clearer it is to them the faster the sales team can go after the right opportunities.

ALIGNMENT: Ensuring the sales reps behavior is in line with corporate objectives is essential. The tighter the alignment, the more effective and efficient the sales team will be at achieving their targets. Managers need to make sure sales activities are meticulously working toward the right goals.

LONGEVITY: Hiring and firing employees is exhausting and expensive. Make sure the sales professionals that are hired are in it for the long-term. Keep them coming back with the right incentives. Make small investments to keep the workers happy— be it a good work environment, espresso machines or a game room.

ENABLEMENT: Providing the right tools and information to the team will increase sales effectiveness. Don’t get side tracked by fancy user interfaces. Look for tools that really help reps find opportunities, increase their selling ability and save money.

STRATEGY: An effective sales strategy is a must. Ensure that all activities tie back to corporate goals. The strategy needs to be clearly communicated to the team. For smooth execution, make sure all team members understand the strategy and receive plans on time.

MOTIVATION: Strong motivation is the key to success. Understand what motivates the sales team. Managers must know what incentives drive sales behavior. Incentives must be carefully executed to be effective. Communicate what the rewards are and how the reps can obtain them.

ACHIEVEMENT: Recognize reps when they achieve their goals. Make announcements and celebrate the team’s achievements. Letting the sales professionals know their accomplishments aren’t going unnoticed will encourage them to continue stellar performance.

NEW IDEAS: Sometimes it’s worth taking a risk. Breaking the mold could be just the thing to give you an edge over the competition. Don’t be afraid to step out of the norm but realize the consequences. Weight the risk and make smart decisions.

ANALYSIS: Visibility into the sales team helps managers stay up-to-date on individual and team performance. Evaluate what is working and what is not. Why aren’t reps meeting their quota? Is it the sales plan or the individuals? Are the incentives not working?

GAIN EDGE: Invest in tools that will give you a strategic advantage over the competition. Really see what today’s solutions have to offer. Three things to look for are quick RIO, immediate and long-term and results, and ease-of-use. 

EXPECTATIONS: Set realistic goals for the team. They should be challenging yet attainable. Overshooting can have the opposite affect you want. Make targets right at sales reps finger tips. Having goals just out of reach will provide the motivational push to grab them.

MINDSET: Effective selling requires a strong mindset. Set expectations to provide the right mentality for the sales team. Communicating goals and rewards will help motivate the team. Heat up the competition with internal sales challenges. Help remind them why they love selling.  

EFFICIENT: Some sales processes are inherently time consuming. Find a way to streamline these processes to increase selling time. Making a small investment can help to save a lot of resources.

NIMBLE: Responding to the ever changing economic climate is essential to long-term success. The ability to adapt can help companies endure any competitive situation. Sales managers must provide the right tools for their sales team to stay agile. Solutions that can increase visibility of opportunities are worth investing in.

TALENT: Know how to make a good salesperson great. Uplifting sales performance is critical to business success. Through coaching and engagement, managers can change a ‘B’ rep to an ‘A’ rep. Make clear, specific goals and track performance on a regular basis to provide regular guidance.  

Callidus exhibited at Mobile World Congress in Barcelona/Spain this week. During the conference, we announced that we signed a reseller agreement with Inycom, a leading Spanish IT provider. The announcement was picked up in various outlets, including TMCnet . Under the terms of the contract, Inycom will resell and implement our sales performance management services in Spain. GEN News also covered our partnership with Inycom and noted that the agreement further expands and strengthens our EMEA reseller network, which already extends to Greece, Romania, Bulgaria, Turkey, Africa, Poland and Israel. Great Ideas covered our partnership with Excel Technology Holdings Limited and highlighted that our award-wining solutions manage entire sales life-cycle from on-boarding to talent development, while maintaining transparency and visibility into sales operation and financial performance.

In EMEA news, Wall Street Journal announced that the Swedish government will propose that senior executives at Nordea AB forgo bonuses in a shakeup of the remuneration system at the Nordic region's largest bank. Times Online announced that BNP Paribas will pay its 4,000 bankers €500 million (£434.7 million) in bonuses after France’s biggest lender beat profit forecasts during the fourth quarter.

In industry news, FOXBusiness announced that ForceLogix Technologies partnered with Sales Integrity, which will continue the expansion of value added resellers.

This week were going to wrap up our section on how to get our sales people prepared to take advantage of the opportunity that lies ahead of us. When the market turns around we want our people trained.

Typically, commission programs are used for revenue generating roles. If your Customer Service Representatives are in a position to influence the customers to buy more, to retain them, to cross-sell them, or otherwise to generate revenue, then this can be a great approach. If they are more fulfillment, helpdesk or troubleshooting oriented, a bonus program might be more appropriate.

If you are just starting out with a commission program for people already on an all-base plan, then funding the commissions will be an issue. For variable pay to really motivate behavior, a number of conditions have to be met:

1. The eligible employees need to have the ability to make the results happen themselves, or as part of a very small team (2-6 people).
2. You need to be able to establish a productivity standard — know how much you expect the employee to “produce” (/sell/retain/collect).
3. There needs to be true at-risk pay so that the eligible employee will not earn their full market value unless they meet the productivity expectation and earn the full target incentive.
4. There needs to be upside for over-performance. This is the counter-balance to the risk you are expecting them to assume in #3 above. Without the possibility of better-than-expected rewards, the risk isn’t worth it. This means that your top performers (top 10% or so) should earn a small multiple of what is earned by on-target performers (1.5 – 3 times as much, for example).
5. You need to have, or be willing to hire, people in the role with an appetite for the rewards and risks of such a compensation arrangement – willing to bet on their own ability to make a difference, and excited about the prospects.

Of course you can move to such an arrangement gradually over time, holding base constant, adding a few percentage points of base to the incentive at target each year (5% or so), improving your goal setting abilities, and learning to manage under a commission program.

Donya Rose

http://cygnalgroup.com/

In Callidus news this week, Birmingham Business Journal announced that we bought ActekSoft’s commission, incentive compensation and compliance software.  Leslie Stretch was quoted saying that, "the combination of Callidus and ActekSoft provides a level of operational excellence and industry knowledge that is currently unmatched by any of our competitors."  This announcement was also covered by CNN Money and San Francisco Business Times . Due to some false statements, Zacks re-issued their coverage on our recent partnership with Seven Seas Technologies.  Our partnership with HAND Enterprise Solutions was also mentioned and it was noted that this will expand our footprint in China’s market.

In EMEA news, Wall Street Journal announced that average bonuses for U.K. bankers rose 40% last year. It was reported that most industry professionals still received the bulk of their compensation in cash, according to a new survey that suggests the clampdown on remuneration in the country has had little impact on the level and structure of payouts.  Financial Times covered the exaggerated statement about the $100m payday for Lloyd Blankfein, Goldman’s chief executive, (he was actually awarded a relatively paltry $9m) to Royal Bank of Scotland’s tussle with the UK Treasury over the size of the state-owned bank’s bonus pool.

I was asked recently about a sales force that has been on a simple commission plan now for years — 50/50 split of deal profit between the sales person and the company. However, in recent years they have been hiring less technically skilled sales people, and it no longer seems worth it to the company to share so much of the profit with them. The company is hiring more sales management, providing technical training, and technical support people to ensure the product is sold well.

Typically as a company grows, the company adds value (brand, product breadth, back office systems, marketing, etc.) and the sales person should therefore be able to sell more with the same level of skill and effort. This means that, while sales compensation should continue to increase year over year (with the labor market), sales productivity should increase even faster — which means that over the long run, commission rates generally come down. And at some point in this process the comp plan may switch from a commission mechanic (% of sales/margin) to a bonus mechanic (earn the target payout for meeting quota, more for more, less for less).

This company has experienced both the maturing of the company, and they have added a decrease in the capabilities of the sales people to the usual combination. So the answer is that, yes, the commission rates need to come down. However, just adjusting rates down and leaving all else alone is probably not the best answer. They should probably have a look at their basic pay structure, sales roles, labor market, key strategic imperatives — and make some structural changes in the plans all at once. Ideally they also support this with training, great coaching and mentoring, exciting new product introductions and lots of reassurance and encouragement. The goal is probably not to reduce total comp delivered per sales person, but to improve the ratio of sales comp to sales productivity. So while earnings continue to increase for sales people, sales productivity goes up even faster.

Donya Rose

http://cygnalgroup.com/

Call us at +1 919 933-2290