239: Incentivising Salespeople - a podcast by Dr. Greg Story

Life is full of various rhythms and flows.  We have a set piece most mornings.  Arise, eat, get ready for work, head out the door.  We work, finish, go to the gym, hobby, etc., or go straight home.  Saturday we have a certain flow going on and it is usually different to our Sundays.  We like certainty, predictability, constancy.  That is all fine, because we are all deep in our Comfort Zones.  This is the cuddly place where we have reduced as much risk as possible and we feel safe.  All of this is bad for the sales life.

 

Sales is chaos.  It is fragile, uncertain, unpredictable, unreliable.  We have to learn how to ride the tiger, not how to dismount.  I laughed when watching the movie Kung Fu Panda with my son, when the chubby panda says “my old enemy – stairs”, as he contemplates the long climb to the top of the temple.  In sales, we have an old enemy too and it is called “comfortable”. 

 

When we get too comfortable, we stop hustling, pushing, striving, reaching.  We get into a routine because we have built up enough repeater clients to make our numbers or keep our jobs.  Sales should be the ultimate meritocracy, because it is all metrics, easily and constantly measurable – how much have you sold today?  That should mean that people in sales are all high performers, but they are not.  There are many average producers in sales, who still keep their jobs.  They are not totally hopeless enough to get fired, but they don’t shoot the lights out either.

 

Pareto came up with the 80/20 split concept and in any sales organization there are going to be roughly twenty percent of the sales folk accounting for eighty percent of the revenue.  That means that eighty percent of the team are only coughing up twenty percent of the revenue.  If the raw amounts being generated in total are sufficiently large enough then it all works.  Sales managers often tend to be spending their time trying to put a better shade of lipstick on those who are not producing enough.  They should be spending their time on the top producers trying to encourage them to produce more, because their contribution will be at a significant scale.  If a low performer increased their sales by fifty percent, it may not be as insignificant as a top producer increasing their sales by only twenty percent.  The numbers show the difference.  For example, the low producer has annual revenues of ten million yen and the top producer has revenues of one hundred million yen. The low producer goes up to fifteen million yen a year, but the top producer would be producing one hundred and twenty million yen annually.

 

Top producers are human too and they get into rhythms where they don’t grow. They are getting enough money now and don’t feel motivated to go for more.  Japan is especially like this.  Incentive schemes are hard to get to work properly in Japan because the individual hunger is not strong.  The society rewards people who fit it in, rather than those who want to stand out.  Being super hungry and motivated to succeed and make a lot of money seems anti-social in Japan and is punished from an early age.  People grow up knowing that if they stand out they will be ostracised and put back in their place pretty quickly.

You hardly ever see “leader boards” of individual sales production in offices.  The numbers get counted of course, but it is all kept demure and polite.  It gets interesting when that new boss just jetted in from some foreign clime, gets religion about individual production and wants to incentivise and recognize people.  Often the people don’t want it. 

 

Those getting recognised don’t like it because they know the knives will be coming out immediately and they are going to become uncomfortable with all this boss approbation and attention.  The rest of the crew don’t like it because it makes them look bad and they have lost face publically.  Japan is the country of don’t stand out and well meaning expat bosses always struggle to understand why the sales people are not motivated by money and glory like at home.

 

I was coaching a client who was having trouble getting production out of the sales team.  The problem was instantly obvious to me.  They were paying a base of ten million yen and a commission on top of that.  No one was motivated by the additional commission, because the base was already high enough.  Very few salespeople in Japan are on commission structures, because they all prefer the safety of a defined salary with a regular bonus.  They know they could earn more on commission, but they are risk averse and prefer to earn less but with more certainty.

 

How can we motivate salespeople?  Recognise top performing salespeople privately.  Take them out for a very nice swanky meal, make it personal, unique, special.  Theoretically, we should try to adjust the salary structure so that the base salary is as low as possible and the “at risk” part is as high as possible.  Now in Japan, at the moment, that is not easy because of the shortage of salespeople.  So we have to start paying them higher base salaries and lower commissions to get them on board.  We have to increase their commissions to keep them with us.  Having said that, we need to try to up the ante on the rewards when they hit their targets. 

 

It is better to keep a base salary you feel is too high to retain people and really crank up the upside, rather than risk losing staff.  For example, in Japan, in this market, if the annual base salary was five million yen and the commission ten percent, you will have trouble getting people to take a drop to a four million yen base for a higher fifteen percent commission.  It will be better to swallow the five million base and offer twenty to thirty percent commissions when they hit a certain target numbers.

 

Take another look at how you reward salespeople?  It has to be motivating for them or why would they bother?  Don’t be mean with the upside rewards.  Remember, your top twenty percent brings home the bacon for the eighty percent of sales.  This is the group you need to get out of their Comfort Zone and get going to go higher, go harder.  This is how you can get scale in production in Japan.

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