Accountable Leadership in a High-Performance Culture

Group of friendly business men and women shaking hands with no friction

Management often makes the mistake of measuring the performance of individuals based on the belief that strong personal performance leads to strong corporate performance, rather than focusing on accountable leadership. This is true only when management understands all the dynamics in the organization that lead to successful business outcomes, and when the business environment is stable. However, even the most casual observer immediately recognizes that usually neither of these assumptions is true.

Companies that want to build high performance cultures must focus on organizational performance and accountable leadership, not personal performance. By setting clear organizational metrics, the individual performance metrics will fall into place quite easily.

This is illustrated best by case studies, not an abstract line of reasoning.

BioPlus Specialty Pharmacy

Let’s look at BioPlus Specialty Pharmacy. Its medicines are expensive; they treat rare, complex diseases. Although the company enjoyed stellar growth, it was not fast enough for the president. He knew the company could grow even faster, but he didn’t know how to do it.

Rather than trying to figure out a solution himself, the president pulled together a team of trusted advisors who wrestled with the issue for a few months. They eventually realized that the roadblock to faster growth was quite simple: the company needed to be able to process new orders in a couple hours rather than a few days. This one change – which measured the quality of its service, rather than its products – proved pivotal in leading to an even greater growth rate.

The challenge in finding a solution was in deciding what to do and how to do it. This solution was easy to measure at the corporate level. It also led to spinoff metrics for staff along the way – and those staff always understood how their efforts contributed to the organizational objective.

Through implementing this solution, the company grew over 400% in three years.

Abbott Laboratories and Amgen

Abbott Laboratories is another excellent example of how accountable leadership fostered a high-performance culture.[1] Abbott hired a financial officer, Bernard Semler, who specifically used accounting mechanisms to drive cultural change. He called his approach Responsibility

Accounting. This approach tied every expenditure back to a specific manager. Each manager was held tightly responsible for his or her return on investment. Each manager agreed to be held responsible for a clear set of objectives during the coming year as well as the budgets to achieve those objectives. These managers were encouraged to be entrepreneurial in how they used their budgets. But deviations from the agreed-upon objectives were not tolerated. This created a culture that required strict adherence to financial responsibility, while at the same time it encouraged highly divergent thinking and truly creative work.

When George Rathman left Abbott to found Amgen, he applied Responsibility Accounting to his new company with the same rigor to create the same culture. What happened next is staggering: within 20 years he built Amgen into a $3.2 billion company with a staff of 6,400. Its stock grew by a factor of 150 times from its IPO price and its stock appreciation was 13 times better than an investment in the general stock market. Rathman clearly built a high-performance culture by implementing strict adherence to accountability.

Hewlett-Packard

Hewlett Packard is recognized as one of the pioneers in what eventually became the Silicon Valley phenomenon. Long before the notion of culture was popularized in the management literature, HP was organized in a highly decentralized structure. The company gave each division manager full responsibility for running their operation as a small business – including full P&L responsibility.[2] This may have been one of the first times a high technology company applied the notion of accountable leadership to senior managers.

But was HP a high-performance organization? To answer that, let’s look at its track record: After incorporating the company in 1947, its sales jumped from $679,000 that year to $5.5 million in 1951, only four years later. Eight years later, in 1959, the company established an overseas presence with a marketing organization based in Geneva and a manufacturing facility in Germany. By 1970 its sales reached $365 million. 15 years later – 1985 – its sales were at $6.5 billion with 85,000 employees. The company had developed a very high-performance culture – and its founders credit their corporate success to a large extent to holding their leaders accountable for their results, not their activities.

The Take Away: Accountability is Non-Negotiable

At the risk of overstating the obvious, accountability at every level is essential to building a high-performance organization. It is not optional. At the same time, our case studies highlight that accountability for results is not incompatible with management freedom or restrictions on creativity. Top performing companies usually urge their managers to be highly creative and take risks – but to do so within a framework that holds them fully responsible for the outcomes the managers committed to originally.

Top performers like to be measured – if the measurements make sense to them and relate to outcomes that truly impact the well-being of the company. But if the metrics are activity oriented rather than results oriented, they are quite likely to “game the system” to “hit their numbers” without regard to the things that are truly important to customers, investors, employees, and other stake holders.


[1] Good to Great: Why Some Companies Make the Leap and Others Don’t, Jim Collins, 2001

[2] The HP Way, David Packard, January 3, 2006

The Right Measures of Accountability Matter

ABM execution costs

Traditionally, employees are taught that if they designed a tight system and measured everything that could be measured, they would have enough accountability. If everyone did everything they were supposed to do and did it well, they were assured of success.

Well, now we know that doesn’t work. In fact, it’s a prescription for failure! The thought leaders in high-performance organizations know that isn’t going to take us where we want to go.

Here’s what works: figuring out what’s really important and establishing accountability for such measures—and only that. Don’t try to micromanage your people—if you do, you’ll see that they always hit the metrics you lay out for them, but the organization misses what’s really important. If you measure the wrong things, you get the wrong results.

Let’s look at the well-documented case of fake bank accounts at Wells Fargo.[1] Management wanted to increase the number of depositors, so they set quotas for each branch to open new accounts. When genuine depositors did not appear, the branches simply opened fake accounts. This ensured that the staff and branch management hit their numbers, but at a very high cost.

First, opening these accounts absorbed considerable clerical time. But it didn’t end there. After a full year of investigations led by Arizona, Connecticut, Iowa and Pennsylvania, the Bank agreed to pay settlements of $575 million. Aside from this steep financial cost, the Bank also lost considerable credibility due to a lack of accountability, and suffered a setback to its reputation in the marketplace.

This is an extreme case, but it makes the point: tightly measuring the wrong metrics leads to the wrong results.

Management needs to focus on the big picture metrics: revenues, profits, market share growth, share price, brand recognition, and the number of people who apply to work at that company. They need to create a vision that everyone can relate to–everyone from the senior management team to the front lines. Then management needs to trust their people. That doesn’t mean you let everyone do whatever they want—it means you give them the latitude to do what’s right for the company and the customer. If the vision is clear and the results are recognized, the results will be stellar and demonstrate accountability.

Don’t believe this? We can show you the research that proves that companies with strong, performance-enhancing cultures significantly outperform those without such a culture; they realize four times the average revenue growth, 12 times the stock price, and 756 times profit growth of those with counterproductive cultures.


[1] https://www.desmoinesregister.com/story/money/business/2018/12/28/iowa-wells-fargo-settlement-attorneys-general/2431320002/

The Front End to a Viable Sales Funnel

planning

The key to a healthy, viable sales funnel begins at Teleprospecting. Determine the number of Marketing Qualified Leads for each Teleprospecting team (I recommend at least 150 leads per person). Then, verify their access to these leads.  Lastly, apply the Teleprospecting Best Practices recommend in my blogs.

Be sure to keep these 6 points in mind, as you establish and expand your teleprospecting team.

  1. The Sales Funnel is King! Instill collaboration between Sales & Marketing to ensure a quality sales funnel. These departments must develop and agree on qualification criteria and other key metrics, to ensure consistent sales funnel growth. Revenue growth will cease without quality Sales Qualified Leads (SQL) and a healthy Sales Funnel.
  1. Hire experienced staff. The Teleprospecting team is most often the first contact a prospect will contact, within a company. Therefore, it is counter-productive to assign entry-level employees to these positions. They lack experience in selling complex solutions and communicating with senior-level executives. With a history of nearly 30 years, experienced professionals are readily available to hire. This is one decision your company will not regret.
  1. Focus Teleprospectors on one Solution. Efficiency begins to decrease as telemarketing teams become responsible to sell & learn multiple products or solutions, especially if they are complex. Focus delivers a quality sales funnel.
  1. Develop and implement Kay Performance Indicators (KPIs), or metrics, to manage a team. Once the KPIs have been established, assign each team to create a plan that outlines a process to reach their goals. This empowers team members to carry out each task and take responsibility to meet their objectives. Managers may work alongside the Teleprospecting teams to ensure the practicality of these plans. These plans also provide a blueprint to manage activities and measure results, for the Manager, as well as the Teleprospector. (See my blog for details here).
  1. Develop a Teleprospecting Playbook. A Teleprospecting Playbook is a set of tools that guide Teleprospectors through the qualification process for Complex Solutions. This playbook must be written and assembled by individuals with sufficient knowledge, such as expert from Product Marketing or Sales.
  1. Build compensation plans that drive desired behavior. A satisfying compensation plan motivates Teleprospectors to excel at their duties. Create compensation plans that focus on the Sales Funnel and generate revenue growth.

These 6 points will allow you to create a strong front-end for your sales funnel. By applying these best practices, your team will produce a healthy, robust sales funnel, providing for an increase in revenue growth.

Alicia Assefa has been managing Teleprospecting and Inside Sales teams for the past 15 years. She is the author of the bestselling eBook “Teleprospecting for Executives Who Sell Complex Solutions”, which is available on Amazon here.

6 Steps to Streamline Your Sales Funnel Process

planning

The Issue with Funnel Bloat

Many of the sales managers I have worked with at over 100 technology companies believed that having more deals in the sales funnel translated to a greater likelihood of hitting their sales goals. While they looked at the size of the sales funnel (revenue potential), they forgot to consider when the deals were put on the sales funnel. They also neglected to determine if the deals were really viable.

In general, the rule of thumb is that sales funnels should be about 3X-6X the revenue objective to ensure that revenue targets are met. Most of my clients showed me sales funnels that exceeded this range. At first glance, I thought that the Sales Managers were doing well at managing sales funnel growth, but as I browsed further, I discovered that 80-90% of the deals were over 2 years old and not viable. Week after week, these Sales Managers would review the deals, and week after week their Reps convinced them that the older deals would close at some point in the future.

The next issue that I uncovered with my clients’ sales funnels was the viability of the newer deals being added to the funnel. After the initial call, Sales Reps should be validating the quality of the lead. Questions to determine viability can vary: Has a decision maker been contacted? Is there real need and pain established? Is the prospect looking at solutions to solve these problems within a reasonable time period? Did the prospect indicate some interest but didn’t have a real need?

One of my clients believed that every prospecting onsite meeting was a true indicator that the prospect was interested in the solution. The Sales Manager required that a quote/contract be left with the prospect after every meeting. When I worked with my client, I found that the Sales Reps did a good job of “showing” the solution. However, they were ineffective at qualifying for need, interest, decision process, and timeframe. This client’s prospects were in the State and Local Government space, where prospects are more willing to meet and see presentations. My client had hundreds of deals on the sales funnel; however, he never hit his sales targets.

Finally, the last issue that I uncovered was movement of deals from the top of the funnel to the “closed” or “closed-lost” stage.  Many deals were stalled in the various stages of the funnel prior to “closed” or “closed-lost” for many months or even years.

These funnel symptoms created a false impression that the client’s sales funnels were healthy and viable. These issues arise when a Sales Manager lacks a good sales methodology or has not made sure that their Reps understand the methodology. In any case, all three symptoms kept my clients from hitting their targets.

6 Steps to Cure the Sales Funnel Bloat

Even though Funnel Bloat can be deadly to a sales team’s ability to hit targets, it can, fortunately, be cured. Follow these 6 steps to continue finding leads and ensure that you don’t fall victim to Funnel Bloat:

STEP 1: Develop a sales methodology that works for your company.

Determine the following:

  • Who are your targets?
  • What pain does your solution solve?
  • What is an average time frame in which most deals should close?

STEP 2: Once you know these elements, figure out the number of stages most of your deals go through. Is the number of stages 5 or more? During each stage, decide what triggers must happen before the deals move to the next stage.

STEP 3: Retrain your team on the new sales methodology and make sure that they understand it.

STEP 4: Take a fine-toothed comb to your current funnel. Any deal that is older than your required time frame, whether that is 3-months, 9-months or 18-months on average, should be removed and re-qualified or put into a nurture program.

STEP 5: Build Sales Engagement tools that support the movement of each deal through the sales funnel.  For example, build an ROI calculator which is easy to use and shows cost savings or build a “standard” demo that can be used by your team in a middle stage to keep prospects interested.

In the final stage, before close, send your prospect a Memorandum of Understanding. The MOU should outline an overview of the prospect’s needs/pains, how your solution can solve their problem, the outlined ROI, and the agreed price. The MOU should also include a date for when the prospect will finalize and legally sign documents and procure the product.

STEP 6: Be ruthless with any deal that is added to the funnel. Your Reps should have to justify why a deal should be added based upon your company’s sales methodology. One of my Sales VP’s used to say, “Get the bad news early.” If there isn’t really pain or necessity, then you don’t really have a deal.

After the cure has been applied, though painful, you will have a viable sales funnel. Once you have a viable sales funnel, you will probably need to ramp up your marketing efforts to get the sales funnel to a level of 3x-6x your revenue objective. Funnel bloat is deadly, so apply the cure and hit your revenue targets.

Is Your Company Complacent?

Over the past 20 years, my main focus has been to turn around lack luster sales and marketing organizations. I have done so over 50 times, and one of the most common phrases I hear from clients is: “It is what it is!”

I have found that when clients use that statement they are saying one or more of the following:

  • They have no control over the current situation and don’t see how things will change.
  • Their situation is too difficult to change and they don’t want to spend the time, energy or resources required to make improvements.
  • The organization is very political and “rocking the boat” is not an option.

In short, the company or team has become complacent. Complacency leads to stagnation. That’s when I’m brought in, to figure out what is happening and to get the team back on track.

Complacency is like a cancer: it can hit fast and without warning. Morale tends to tank and numbers and goals are missed.

Here is what I recommend to cure your company of the complacency disease:

  1. Use a survey to ask your customers and your team how the company is performing  in the following areas:
    – Sales
    – Marketing
    – Customer Service
    – Innovation
  2. Compare the results of the two surveys to find issues and gaps.

Be fearless.  Use the survey to get to the heart of your company’s complacency and lackluster results.  Take the responses seriously.  Make a plan for addressing the challenges, focusing on the most impactful issues first.

When I am tasked with a turn-around situation, I survey every group and review every process that I believe to be important.  I also get customers’ perspectives. The information provides me a way to diagnose the problem and to find a cure.

I recommend that these surveys are done quarterly.  This is a great feedback mechanism and will provide valuable insights, as you turn your company from a complacent organization to a high performance organization.

Teleprospecting at Christmas

This year Christmas is in the dead smack middle of the week and so is the New Year.  On Wednesday, December 25th and Wednesday, January 1st, most corporate offices will be closed for the Holidays.  Many prospects will be in a Holiday stupor days before these holidays begin.  So what is a Teleprospector to do?

As a 20 year veteran of inside sales and Teleprospecting management, I highly recommend that companies give their Teleprospecting teams a well-deserved break from phone work, starting December 23rd through January 3rd. If you don’t have a great sales funnel from leads, you won’t get one at the end of the year.  If you have a very successful Teleprospecting team, who consistently generates a slew of SQLs each month, the leads will sit, untended by sales, because the sales team will be focused on bringing in end-of-year deals.  And in general, it will be more difficult to get prospects on the phone, as they too are trying to close deals, close books and shop (online from their desks) for gifts.

So, what should a Manager do with the team during the period between Christmas and New Year’s Day?  Here is what I recommend: train, refresh, plan and cleanse:

Train: This is a great time to train teams on sales methodologies, call strategies, new products and new productivity tools. Teleprospectors make over 13000 dials per year (260 work days * 50 dials per day).  During all this dialing, skills can take a beating.  Use the 6-8 days around the holiday to do role plays, learn new sales methodologies and up the team’s game.  You may also consider running a “demo” day, where team members learn how to demo your solution.  This is a great way to get the team to grasp what your solution is and how it helps your clients.

Refresh: Use the Holiday down time to refresh the team on your corporate and product message. Over time messaging can get sloppy. If you can, bring in your product marketing expert to run a mini-training to review messaging, updates to your solution and customer stories.

Plan: To ensure that the year starts out right and that your Teleprospectors will meet outlined goals, have them work on their GOSPA or Success plan for the coming year during the Holiday period.  Your team will have several days to think about the goals, objectives, strategies, plans and activities which they will implement to meet next year’s quotas and Key Performance Indicators.

Cleanse:  The holiday period is the perfect time to cleanse the database.  Contacts and companies change a lot during a 365-day period.  Which companies and contacts are still valid?  Who has moved on to a new company?  Which of your prospect companies have been acquired? Which companies should the team target to call over the next few months?  Which leads should go back to marketing for nurture? I advocate that companies do a regular database cleanse and this should be the last cleanse for the year.  During this period, Teleprospectors will have time to research companies and create their list of “call” tasks that will help them to kick-start the New Year.

Making Teleprospecting calls during the holidays can be frustrating.  Your prospects will, for the most part, be in “Holiday” mode.  It will be tough to get people on the phone or to engage them during this time.  Leads that are generated during this period will probably sit for 2 weeks or longer and will need to be re-qualified.

Teleprospecting during major Holidays can be frustrating.  Give your team a well-deserved break from the telephone this Holiday season.  Train, refresh, plan and clean.  Come January 6th, your team will be ready to pick up the phones.

3 Questions to Ask when Interviewing Potential Hires

In this job market, when companies have open Teleprospecting positions (or any open positions, for that matter) they tend to receive a large number of resumes.  The position is open for a reason and any delay in filling it may delay sales funnel growth.  That is why companies feel compelled to get the hiring done fast. In an effort to fill the position quickly, some resume screening occurs and viable candidates are brought in for in-person interviews.  Several key people are asked to interview each candidate to review their skills and to see if they would be a fit for the company.  These interviews happen within the same day. I call this the “Interview Shuffle”.

During the interview shuffle, Teleprospecting candidates meet with several people from marketing and sales.  In some cases, candidates will have a final interview with the CMO, CSO and even the CEO.  Depending on the number of people required to do the interviews, the actual time each member of the interview team spends per candidate may be only 30-45 minutes, at the most.

These are the 3 reasons why I advise my clients against using this method to interview candidates:

1. Who is this person?

In 30-45 minutes it is difficult to determine if the candidate is a good fit for the position or the company.  A series of questions are asked and people who are good at interviewing may wow each interviewer.  When a decision is based on this first series of interviews, I have seen that the hiring manager regrets their decision within the first 3-6 months because the candidate isn’t performing as well as was hoped. Bring the candidate in at least 2-3 times.  Ask the candidate a few of the same questions that were asked during the first interview.  Are their answers generally the same?  Or are their answers significantly different?  Plan the questions that the interview team will ask each candidate.  Make sure that the bulk of the questions are “situational” questions.  Ask questions that require specifics for how the candidate performs their job.  For example:

Question: Give me an example of a typical day at your current job.

Good answer: “I get into the office around 7 am and take a quick look at my activities that I have set up for the day. If there is a company that I need to research, I will take a moment and Google the company before I make the call.”

Bad answer: “Well, in this job, I guess most people start early after they get their coffee and then they start making calls.”

Situational interviewing takes time.  It is the best interview format to uncover if the candidate knows their stuff.  This interview process might take 90 minutes or more for each interview team member to complete.  The time will be well spent because the information uncovered will help you to make a more informed decision.

2. What is the commitment level?

When a candidate is interviewed by the interview team on the same day, there is no way to tell how committed the candidate is to the position or the company.  When candidates are asked to return for additional interviews, the hiring manager has an opportunity to verify continued interest.  Determining commitment level is another reason why the candidate should come back to the office 2-3 times. By doing this, you will see how committed the candidate is and it gives you more than one day to determine if they are the best candidate for the job.  Are they professional and appropriately dressed each time? Do they exhibit a continued level of enthusiasm?  Do they ask additional and interesting questions about your company with each subsequent interview?  If not, the candidate may not be right for the job or your company.

3. What does the interview team think?

There is a Chinese proverb that says “Don’t be over self-confident with your first impressions of people”.   There are many people who are very good at interviewing.  Sometimes these people are great on the job and sometimes they aren’t.  I do believe that managers should trust their gut if they don’t feel good about a candidate.  However, I think that a hiring manager should give themselves some time to see if their first “good” impression sticks.  This can’t be done in 1 day. Bring the candidate back.  Circle back to the interview team to see if they too continue to feel good about the candidate.

The Interview Shuffle enables companies to get their open positions filled quickly.  From my experience, however, this hiring method costs companies time, wastes resources and inhibits a company from meeting objectives.  Too often the wrong candidates are selected and the position is open again within a few months.

I recommend that you have the hiring manager conduct the first interview; taking time to ask situational questions to determine fit. Candidates who pass this first interview should be asked to meet with the interview team and the hiring manager a few more times and over a period of 8-10 days.  This will give everyone time to get a good sense of the person.  If you rush the hiring process you might regret your choice later on. Take a few weeks to get a sense of the person so that you will not have to repeat the interview process again in a few months.

How to Keep Your Team Motivated

two motivated people working hard on their laptop and tablet

A few weeks after school started this year, my daughter informed me that she was “done with school.”  Because she is a straight-A student and only a sophomore at her private Catholic high school, I was very worried and concerned. After many conversations, I found out that she wanted to have more fun and more respect from her elders. I took this information to heart and we made a plan. She is now a happier and motivated student.

I believe that motivation has to come from within. What should corporations do to ensure that their employees remain motivated day after day for years? Here are 3 steps your company can take to keep your team motivated and focused:

  1. Survey your employees to get a sense of what gives them satisfaction and what keeps them motivated at work.  These surveys should be anonymous. In the survey, ask your employees what they need from the company to feel like they are making a contribution to the company, their families and their communities.  In addition, the survey should address the following:
    1. Find out if they feel respected and appreciated by the company and the management team. Ask them to explain the ways they feel respected and appreciated. Perhaps they would like more responsibility or a greater say in how they perform their duties.  Maybe the team feels disrespected by a certain manager who may need to take some classes in managing people.
      1. Ask your employees if they believe they are working too many hours or feel compelled to work during evening and weekends to get caught up on their work.
        1. Ask your employees if they believe they are working too many hours or feel compelled to work during evening and weekends to get caught up on their work.
        2. Ask your employees if they believe they are working too many hours or feel compelled to work during evening and weekends to get caught up on their work.
        3. Ask if your company has too many or too few meetings. Either of these choices can lead to a lack of productivity and motivation.
        4. Once you have compiled the survey results, review the issues and determine how to address them in the short and long run.  Create a “task-force” to brainstorm on the issues and to make recommendations for improving the situation. Be prepared to implement the recommendations in a timely manner. Create a timeline for the roll-out of these recommendations.
        5. Share the survey results, task-force recommendations and roll-out plan with your employees to help them stay motivated.

The answers may be as simple as providing:

  • Employee training on subjects such as organizational skills, tool operation, or time management.
  • Team off-sites, a few times a year. These should be fun and engaging for your employees.
  • Opportunities for team members to earn bonuses or additional PTO days.
  • Lunch time activities such as yoga, meditation and stress management help keep employees motivated during working hours.
  • Some financial support for those who want to go to University or graduate school.

Companies who stay in touch with the needs of their team members are more likely to have loyal, productive and motivated employees. These are the things that success is made of.

I would love to hear how your company keeps your employees motivated. Please email me your ideas at alicia@somametrics.com.  I will compile these to share in a future post.

The Best Coaching Session

The best coaching session that my team had was when I was the Director of Inside Sales at an educational software company.  One day, out of the blue, the CEO called me to ask if he could “coach” 4 of my Inside Sales team members.  He wanted me to select two top producers and two under-performing team members.  His plan was to spend 1 hour with each Rep.

He did 3 things that made for a great learning experience for my team and a lasting impression for me, as a manager.

  1. Lead by example.  The CEO started each of the sessions by making phone calls.  He wanted each team member to see how he approached a first call with decision makers.  He didn’t let any of the prospects know that he was the CEO.  He made several calls, while the Inside Rep took notes.  After the first few calls, the Inside Rep was given the opportunity to make calls.  Back and forth this process went, for the entire hour.
  2. Have a goal for your session.  The goal for each team member and the CEO was to generate a meeting/ further conversation with the prospect to uncover need and interest.  The CEO threw down the gauntlet.  Who would get the most meetings, during the hour coaching session?  The CEO beat only 1 team member.
  3. Make it “win-win”.  The purpose of the coaching session was to give the CEO a better understanding of the challenges that the Inside team faced, every day.  He also provided team members with insights on how they might improve their messaging and responses to questions. At the end of the coaching period, the CEO came to my office and told me that he learned a lot:
    1. He didn’t realize how difficult it was to get to decision makers on the phone and the number of dials it took to do so.
    2. The team was far more advanced and knowledgeable than he had imagined.
    3. The energy and spirit of the team was very positive and supportive.
    4. He thoroughly enjoyed the session and if time permitted, he would come back.

I asked the team members how they felt about the session.  Hands down – everyone loved it.  While, initially they were nervous, by the end they felt like they had learned from the top sales guy at the company.  They also felt appreciated and understood.

Coaching sessions should be about improving performance and upping the game.  They should motivate and thrill team members.  Establish the goal of the coaching session, lead the team by example and plan to be amazed by your team.  This will be a “win-win” process for everyone involved.

The Perfect Compensation Plan

predictable revenue growth

Driving Sales Funnel growth, meeting revenue objectives, and getting sales teams to meet or exceed sales metrics are among the many challenges faced by our clients. Quite often, these problems are self-inflicted. Large salaries and commissions provide little incentive for sales teams to achieve the metrics that drive Sales Funnel and revenue growth.

In order to meet your targets, you need to introduce a compensation plan that encourages the appropriate behavior and provides the right incentives for your team to work towards their goal. Key Performance Indicators (KPIs) are the activities that drive Sales Funnel and revenue growth.  KPIs that fail to be established or met, will result in a loss for your target revenue. Example KPIs for Inside Sales might include:

  • Key conversations with prospects that establish pain & fit. Without frequent conversations with prospects, there will not be enough activity to grow the sales funnel.
  • A Sales funnel that is in excess of 3X the revenue objective.  We suggest that clients analyze the sales funnel activity from the past 3-6 months to determine their closing ratios.  Some of our clients have only required a sales funnel of 1.5X their revenue objective, while others have needed a funnel of 5X, to ensure that their targets were met.
  • A pre-established number of demos.  We suggest that our clients determine the ratio of demo presentations to closed deals, to establish this metric.  One of our clients found that 75% of demo presentations generated closed deals.  For this specific client, demos were very important and became a top metric for their Inside Sales team.

What is the best way to ensure that team members meet or exceed their KPIs? Fifteen years of experience and association with over 100 companies, has led us to this answer. The answer: Build a compensation plan with three distinct components: Base Pay, Performance Bonus, and Commission.

Three Components of a Perfect Compensation Plan

  1. Base Pay: Companies with a high base salary often have poor performance within their sales teams. Base salary should accommodate a decent quality of life within said region. Base Salary should not be able to provide “luxury” items, keeping incentive for the team to meet their established KPIs.
  1. Performance Bonus: Compensation plans must provide a pay-for-performance component to encourage appropriate team behavior.

For example: if the monthly KPIs include a specific number of Key Conversations, Sales Funnel growth, and Demos, the representatives should receive a monthly performance bonus for meeting or exceeding these established KPIs. Performance bonuses work very well to ensure that KPIs are met.

  1. Commission: Commission should reflect the achievement of KPIs.

For example: suppose that 5% is the highest commission rate given at 100% of quota.  If a team member has met 100% of quota and 100% of their KPIs, they should receive the highest commission rate.  If not, the commission rate should reflect their achievement of quota and established KPIs.

Appropriate “Selling” behaviors develop when compensation plans are structured around KPIs and Sales Funnel growth.