Managing and Motivating Millennials in the Work Force

Many millions of words have been written about Millennials—or that generational cohort born roughly between 1981 and 2000. They are called Millennials because the first groups of the cohort “came of age” around the turn of the 21st Century.

Why is this demographic group of such great interest to employers and the society in general? Three reasons we believe:

• There are currently 80 million Millennials in the US and they represent a large portion of the workforce. They are rapidly becoming the workforce.
• They are often described as the Net Generation because they have never known life without the internet. Hence they are highly connected, technology savvy and are accustomed to quick action and rapid access to information. They seemingly adapt early, quickly and easily to technology change—not kicking and screaming like some members of past generations. This may be threating to some.
• As a group, they are believed to be different from the generations that came before because Millennials supposedly lack motivation and drive, and will be more difficult to manage than employees of 10 years ago. Is the old motivational “playbook” obsolete?

Earlier this year, I conducted a sales force compensation and motivation seminar at the University of Wisconsin for sales managers. We have done this, and other similar sales-based seminars for over 20 years. This year, we were asked to prepare a new section in our presentation to address the growth of Millennials in the workforce, and discuss changes companies and employers should consider to more effectively pay and motivate the generational trend. Clearly, this an area of great interest.

As a first step, I did research regarding Millennials from published and available sources regarding generational traits and characteristics that likely can impact employer motivational and management decisions. There seems to be no single authority on the subject, but there surely are plenty of opinions. Here are some credible findings or opinions shared with seminar participants:

• Millennials are optimistic, in spite of a tough economic back drop;
• 75% say that wealth is very important to them (this is 30% higher than the Baby-Boomer generation);
• They are impatient with traditional (company) structure, slow pace and limited flexibility;
• They have high expectations as consumers of any product, service or organization; and
• They require a clear mission combined with freedom from rigid structures to achieve that mission and their (own) goals.

So what does the above mean to managing and paying a Millennial? Or in the case of our seminar, managing and paying a Millennial sales force? While preparing our seminar materials, four recurring motivation and management practices became clear:

• Tell your employee how you will be defining both theirs and the company’s success. Give them that mission that they both seek and require.
• Provide frequent feedback regarding their performance and make it clear that there is (demonstrated) promotional opportunity within the organization. Tell them often they are successful in fulfilling that mission.
• Match company processes and customer outreach with their fast-paced and digital orientation. They are used to “fast.” So make your company move fast(er). Ultimately, this can only make everyone more productive. And, what a great opportunity this presents to upgrade the entire staff.
• Give them an opportunity to earn increasing income through bonuses and incentives—push the upside. Switch to higher bonuses with lower base salaries, if it is practical and fits their individual risk-profile. They are living through a tough economic environment, so provide an opportunity for them to break out—based on their own energy and hard work.

Many of the participants in our session had Millennials on their sales teams and a long discussion ensued regarding both motivators and impediments to the success of these employees.

Two conclusions emerged: First, the four practices I shared above are the right things to do for employees of any generation—Millennial, Baby Boomer or somewhere in between. Second, it became clearer that there was no secret to success or “decoder ring” for motivating Millennials—the tried and true models of human behavior will work fine with this current generation—just like they have done with earlier generations for 3-4 decades. I was a bit surprised based on all of the literature on the subject, but convinced.

So, do not be put off by all of the experts waxing eloquent on the subject of Millennials. Odds are that they are (and will surely prove to be as a group) motivated and productive employees. And, the motivational tools and practices you have used in the past will be just as successful with this group as they have been in the past. As a bonus, they will bring greater technology skills to the workplace than most employers have ever seen—do not waste the opportunity.

The real issue with the Millennial generation may be more about them managing you than you managing them. And, you know how hard that can be!

Is my company as productive as it can be?

The answer to that question is probably “no.”

Are you currently perplexed by lower profitability, or a perceived high cost of service delivery, or are you just striving to be as good as you can be? If so, step back for a moment and measure your organizational productivity and apply those results to improvement.

Now you might say in response—that is a wonderful idea, but how do I measure organizational productivity?

In our experience, there are a number of metrics that can be used to measure or monitor the productivity of an organization. Six common examples are shown below:

• Size of the total workforce when compared to sales volume or profit contribution;
• The ratio of direct (sales, direct-client contact or line plant-manufacturing staff) to support and/or overhead employees;
• Various direct or support departmental expenses as a % of sales or profit;
• The throughput of your “manufacturing” facility—e.g. tonnage processed per unit of labor or lines of programming code produced per programmer;
• The support cost to produce and process a sales transaction or order; or
• The average size (revenue and “lines”) of customer orders or shipments.

While there surely may be other metrics on the tip of your tongue, these are representative of how productivity can be measured—and a good place to start an investigation.

With these metrics or other metrics more specific to your organization selected, we suggest that you embark on a simple 3-step research and analysis plan.

1. Measure your performance metrics. Look at the current performance of each selected metric and go back at least three years to seek any trends (good or bad) that may exist. Some metrics may be hard to get at or discern from company reports or systems, but the extra effort will be worth the cost. Accept no “too-hard to find” excuses if you are serious about this. Trust me, unless you measure this stuff already, the outcome of this 1st step will be very revealing.
2. Find comparative or industry survey benchmarks, if they exist. If you can find some industry or other credible comparative benchmarks, measure your results (for select metrics) versus survey data for similar organizations. Where you rank against other organizations is always a great (and unassailable) way to see how productive you are.
   
   That being said, finding this type of survey data is easier said than done. A good place to look for these types of surveys are trade associations or industry publications. You may also be able to find some information in governmental publications. If you are a public institution—like a municipal government or park district—more comparative information may be available because of wider (and required) budgetary reporting and the lack of survey-participant caution based upon competitive advantage or factors. Getting comparative data is a real plus, but by no means necessary. [You can also do your own survey if you want, but it is no small enterprise to undertake.]
   
3. Establish internal productivity improvement goals based upon the metrics and results gathered in Step #1 whether you can find industry benchmarks or not. Yes, just say we can do better—and you probably can. For example, establish an annual goal this year to increase organization productivity by +5% by year’s end. Assign achievement of the expectation to the appropriate senior officer, and measure progress each month. In response, someone in your organization is likely to say something like: “We should apply 6 Sigma.” Well you can go about applying all that stuff (fish bone diagrams & the lot), but we believe the +5% improvement demand will get you to the same result in the end through hard work and institutional knowledge. And do not forget, you will need another improvement goal for next year.

Some might say you can skip right from Step #1 to Step #3, and we would agree—in fact, Step #3 is designed that way. But external data is always valuable to establishing improvement goals and truly defining excellence.

Do you want to benchmark and improve the productivity of your organization? Follow our simple 3-step plan.

And, as an added benefit, you might just drop another point or three to your bottom line in the process. Now have I got your attention?

Do it, and tell us what you find.

Is your strategy plan really strategic?

The word “strategy” is a most overused and misunderstood term.

Most organizations have a strategy or a strategic plan, but it is often just a collection of projects or actions that may or may not have an impact on the future direction of the firm or organization. Do you have a strategy or just a bunch of projects or actions strung together on a piece of paper marked "strategy?"

How do you know the difference? Try by asking the following questions about your strategy:

• Is your strategy transformational? Will the actions included in your strategic plan bring you to a new level of future success or make you something that you must become in the future to either compete or survive? Or basically, will it make you something you are not today but wish you could be? For example:
• Will you be # 2 in your industry?
• Will you become the most customer-centric company in the market place?
  or
• Will you be the most cost-effective public institution in the state?
• Is there a clear and overarching theme that binds each and all “strategic” initiatives, actions or projects together? Or on a more basic level, does everyone in the organization know why they are working on these projects—often taking valuable time away from their day-to-day operating responsibilities? If manager and employees just see work associated with strategic plans projects as a “flavor of the day” priority, it probably is just that—and not strategic at all.
• How will you know you have won? That is a simple question, but one not often asked nor included in a strategic plan.

I often tell clients that they should start their strategic planning process by writing A Statement of Strategy. Such a statement is a concisely written document that outlines the definition of "transformational" for your company and the overarching theme that will bind all future actions of your strategic plan together. If you are at Point A today, what is Point B and why are you going there?  I also caution that it is important to write your strategic plan without relying on financial data—in short write it without any numbers. This is done to avoid having strategic planning become nothing but a budgeting exercise.

Of course, there is only one “number” that we will allow. That is a clear definition (or benchmark) that will describe how the company will know it has succeeded in fulfilling or implementing its strategy. Use your imagination as to what such a benchmark may be for your organization. It may be simple performance data like: sales or profits or comparative market statistics, customer opinions or outcomes, or a major event like a completed competitor acquisition. How will you know you have won?

Is your strategic plan “strategic”? Ask the above questions, and see if you can answer all three in the affirmative. If so, you likely have an effective structure for a strategic plan—ready to be implemented. If not, have the management reset, sit down and write a (your) Statement of Strategy. Then proceed with creating a strategic plan.

Wilkening & Company has worked with clients in the creation and implementation of successful enterprise strategic plans. Our approach is unique and focuses upon matching and linking strategic objectives to the strengths of the organization. To learn more about our approach search for prior articles we have published on the subject. Type in “strategic planning” on the Corner Office E-Notes tab at www.wilkeningco.com. We can also be reached at (847) 823-5090.

Don’t Forget Sales Manager Pay

Twice a year, I conduct a ½-day seminar at the University of Wisconsin School of Business on the whys and hows of sales force compensation. Over time, the audience has been in sales management, with varying levels of experience and decision making authority. We have done this for nearly two decades.

During our session, we focus our attention primarily upon members of the (field) sales force. We discuss what motivates different types of sales professionals to succeed (i.e.: sales-success profiles), and then review what compensation (and other motivation) tools represent current best practices and work best in various situations. It is a quick-paced three-hour journey.

At the very end of our discussion and slides, we always pause to remind the session participants: Now, don’t forget the sales manager! Why do we say that? Because the expectations, tools and methods for rewarding sales managers are quite different than those we have discussed throughout the previous few hours in addressing the needs of the field-sales professional. Then, I spend about 10 minutes delineating those differences to the participants. It always feels like we are not spending enough time, and we are likely not.

We have more time and space to discuss the sales manager today. So let me outline below what we have found to be the three keys of success for effective sales manager compensation.

1. A sales manager is not just a better-paid field sales professional. A sales manager is just what the title says: a manager. We believe the job of the successful sales manager must be focused upon two prime activities—
1.  Building bridges, or linkages, between the organization’s strategic plan and the account-based actions and initiatives of their sales team undertaken within their assigned district or region—i.e.: their regional sales plan. Managers direct and advise their sales professionals regarding what to do, and more importantly, what is expected. Some call this merely goal setting. It goes well beyond that.
2. Developing and improving the skill base and overall quality of their field sales team. The sales manager must determine who can do the job, and alternatively, who cannot. Then their job is to first maximize the impact of their high-skilled and best sales professionals, and then improve or replace other (less-skilled or capable) members of the sales team.
2. The sales manager is paid quite differently than a sales professional. An effective sales manager pay plan will pay the manager primarily based upon the results of their entire sales team. If their sales team is to deliver $40 million in sales next year the manager will generally earn a competitive or target (agreed-upon) amount of pay—and the mechanics of the bonus plan will assure that. While there may be other components of pay, if the sales manager is not held accountable for the performance and actions of their team, the plan is way off target and that sales region will likely fail to meet the organization’s sales or profit objectives.
   
   You also see a different mix and amount of pay for a field sales manager plan. The sales manager will generally earn at least 30% more in total annual compensation (salary plus bonus) than that of an experienced sales professional, if they both achieve targeted levels of performance. Typically manager salaries will also be higher than that same experienced sales professional. Of course, higher or lower levels of performance and experience will change that total compensation spread.
3. Sales manager bonus pay is riskier. Since the sales manager is solely (or jointly) responsible for his or her district or regional performance, a well-designed bonus-pay plan will reflect that performance. Consequently, if the sales manager meets their plan and underlying company strategic goals (for sales or profit), they will fully earn their agreed-upon annual bonus. If they do better, they will then make more. But if their sales team underperforms, they will earn much less. And at unacceptable levels of performance, they can earn nothing or very little in annual bonus. Clearly, we are not talking about a classic commission or a commission-override pay plan here.

Now some would say: “all the above is good, but we are a small firm and our sales managers must maintain their own book of business to earn their keep.”  It is common for sales management (all the way up to the company President in my experience) to have a few accounts that they manage. There are some good reasons to do this (e.g.: client’s choice, field engagement…), but there is a limit. If your sales manager is spending more than 10% of their time managing and servicing their “own” accounts, they are likely not operating as a manager and your district or regional results will surely suffer. Further, you have now provided an excuse for failure that goes well beyond compensation issues.

Are your sales managers acting like managers, and being paid accordingly? If the answer is no or you are unsure, go back and apply the rules and principles we stated above to your sales management team.

2015 will be here in a matter of weeks. As you think about making changes to your sales incentive programs for the coming year—don’t forget the sales manager.

Wilkening & Company has assisted clients with improving their sales effectiveness and sales force compensation systems for over three decades. Are your 2015 sales professional and sales manager pay plans everything they should be? If you are unsure, call me at (847) 823-5090.

Paying your sales force to sell the product of the future

Substituting purchased subscription-based services for hard company assets is becoming increasingly popular. This particularly true in the area of IT software and hardware services, where “cloud solutions” are rapidly gaining industry traction and favor.

Cloud solutions are offered by both hardware and software providers (or their channel-selling partners) to create both virtual processing capabilities and software ownership or access for the users of both. This allows the client to move from a capital investment model to a fully-supported leasing model and reduces the need for periodic major investment combined with ongoing support staff, facilities and other overhead.

We recently helped produce and participate in a webinar entitled Cloud Sales Compensation: The Challenges, The Solutions with Tom Horan of Cloud Business Builder.

In our webinar we provided the example of a traditional hardware and software reseller firm (not a manufacturer) that desires to keep pace with technology and market trends and rapidly grow its mix of cloud-based business and client base from virtually nothing to nearly 40% of its total business mix in just 3 years. This is clearly an attractive value proposition for the reseller in terms of avoiding technological obsolescence and creating increased financial enterprise value through steady and profitable multi-year contracts “on-the-books.”

While one can see and can quantify the benefits for the company, is the sales force also motivated by these same benefits? In short, no. We find that in the cloud-service market the sales force may be very conflicted regarding what is in their best interest. Why is that true? Typically legacy-product reseller sales pay arrangements are built around selling periodic and larger client sales of hardware, software or “plumbing.” If I can sell $100,000 of hardware today and get a $5,000 check versus signing a 5-year cloud-service subscription for the same total of $100,000 and get a $1,000 check, I know what I would be motivated to do.

Does this dilemma sound familiar to you?

While our recent webinar focused upon cloud-solution selling issues, we believe the two-step sales incentive compensation plan offered below would apply to any company trying to motivate its sales professionals to shift from focusing on its traditional (comfortable) products to rapidly adopting a new strategically-important product or service—the product of the future.

1. Communicate with your sales force about the strategic importance of selling your product of the future (whatever it may be). If you expect a quarter of 2016 company (and their) revenue will be coming from this new product, be clear about it.
2. Pull out the sales-compensation toolbox and apply a few reliable and proven methods and tools for getting the attention of your sales pros.

• Shake up or replace your current commission structure by paying more for strategic products than others. Say 2% of all sales, and 8% for strategic products (e.g.: cloud-service) sales—the amounts or ratio of old to new is up to you. But be sure that the strategic premium is only paid if annual minimum revenue expectations are met—such a practice also avoids commissions becoming energy-sapping annuities.  
• To the above foundation, continue to shift the sands by applying a bonus or two with your new core commission structure (for example)—
• Pay a flat  bonus (say $10 to $15,000) if your strategic-product backlog doubles or reaches an agreed-to amount by year end; and/or
• Pay bonuses for selling high-value-building products, such as multi-year service contracts, based upon the length of the contract—say $2,000 for 2 years, and $3,000 for 3 years, etc. [As a general rule: pay commissions as revenue is received, but bonuses can be paid at time of agreement signing.]

Other bonuses can also be considered based upon company objectives, but remember to be effective, any incentive compensation plan must be simple.

A simple and organized approach as outlined above can put you and your sales force on the same page in 2015, and assure attention is paid to your chosen product of the future.

Whether your sales force is selling cloud-services or another strategic product of the future, we believe our 2-step plan can be both an effective attention getter and revenue and profit producer. If you agree, start today making plans for your new 2015 sales compensation plan. Do not hesitate. Your competitors won’t.

Wilkening & Company has assisted clients for over 25 years as sales consultants with the design of effective sales-compensation systems using proven pay tools & techniques. The firm has provided advice to clients in the services business including software publishers and sellers. Have a question regarding sales force pay, call us at (847) 823-5090.

Is your pay plan working? Try doing our top-line review this summer and find out

I am often asked to help a client determine whether their current sales rep and sales manager commission-bonus plans are working, by design or in practice.

Before engaging in time-consuming and in-depth rounds of fact finding, interviews or analyses, I always suggest a “top-line” review to see if there appears to be a problem in the first place.

So, what is a top-line review? Glad you asked. It is a high-level analysis of the effectiveness of your current commission-bonus plan. It simply asks the general question: "Are your sales reps and managers being paid correctly based upon their performance?" To do so requires three simple steps:

1. First, collect two years (or more) of performance data for each sales rep, sales territory, account assignment or region—however the sales force is organized. You will want to use performance metrics like: revenue, gross profit, contribution profit before overhead, volume or other quality-of-revenue measure of performance. Much emphasis should also be placed of year-over-year growth. When I have finished collecting this data, I then meet with the CEO and ask which performance metrics are most important to enterprise success—usually it quickly evolves into a sales versus profit discussion. With priorities set for the performance metrics, we then rank the sales reps and managers high to low starting with the best performers within the entire affinity group at the top of the page. Simple so far?
2. Then, we collect sales-rep and manager territory or region commission and bonus data for the same period of time as the above performance data—we usually recommend the last six to eighteen months, or more. Current-year data can also generally be predicted based upon (at least) six months of year-to-date results for both performance and pay. With the matching commission-bonus data in hand, we can then also rank the sales reps and managers highest to lowest with the best earners at the top of the page—just as we did above. Do you see where this is going?
3. Lastly, lay both above lists side by side. Do the best performers earn the most?  While you are seldom going to find a perfect one-on-one match or correlation, an effective pay plan will (rank-order) match top performance and earnings over 75% of the time.  And if you break the performance rankings into top 1/3, middle 1/3 and bottom 1/3, the correlation of pay and performance for an effective plan should even be higher. 

Using a top-line review, an effective pay plan will clearly shine, while non-effective plans will display nothing but exceptions. If your plan is clearly not effective, quick action is indicated—and midyear is a good time to find out.

While the findings of your sales-pay assessment might not turn out to be black and white, the above analysis will clearly present a series of questions to be addressed and will also likely prescribe a required course of action and next steps.

It is the middle of summer and your accounting staff has just probably closed the 1st half of the year. Ask your CFO for 2013 and 2014 YTD performance metrics tomorrow and start your top-line review immediately. You have no time to lose.

Wilkening & Company has spent three decades assisting clients with improving sale force effectiveness through performance management, compensation and organization. If you think your sales force or sales-pay plan is falling behind the competition or the market, call us we can help. bob@wilkeningco.com, (847) 823-5090.

Managing employee expectations

Most discord is the result of unfulfilled expectations. This bold statement is Shakespearian in its origin and represents one of the unavoidable truths that govern employee-employer, individual or family relationships.

In short, when an employee or a stakeholder expects one thing, and then is disappointed with a lesser outcome, trust and understanding will suffer. This is a subject that we often broach or otherwise discuss when addressing the subjects of incentive pay and compensation or relations amongst the stakeholders within a family business. Today I will focus upon the broad issue of matching rewards with employee expectations—to assure positive outcomes.

How many times have you heard the following from an employee or group of employees:

• “What do you mean I am not going to get a raise this year?! I have always been told I am an excellent performer.”
• “How is it possible that members of my sales staff are earning more than me—I am the sales manager?”
• “What do you mean the company did not make enough money this year, and there will be no annual bonus? Someone said we actually earned more this year than last—and I got a $15,000 bonus for that. Is that true, and what do I tell my spouse about the swimming pool?” [in the words of Clark Griswold]
• “How come Joe got that promotion, instead of me?”
• “You did not tell me that I was responsible for growing sales by 15% this year, now you are telling me that only 10% growth means I get no bonus!”
• “You told me that I would earn more than any member of our key-competitor’s sales force. I am not. What gives?”
• “It’s April and I am not earning what you suggested I would earn by this time in the year.”
• “You have always treated me fairly in the past, why not now?”

Do you recognize a situation above that has also caused some angst within your organization? If so, look at the two common threads shared in most of these statements. First, the employee did not get what they believed was promised; and second, the employer understands the promise-to-be-met quite differently. Of course, in the last statement the train seems to have fully come off the tracks for unknown reasons—the manager asks: “What did I do (or not do)?”

In any event, there is actual or brewing trouble with regard to the employer-employee relationship that needs to be fixed or reversed fast (if fixable, at all). Were these misunderstandings and disappointments avoidable? In 99% of cases the answer is a resounding yes.

What can an executive or manager do to avoid this type of future trouble? We suggest the use of four basic and simple rules to establish clear understanding between employer and employee. This simple four-step strategy that can be used universally or selectively:

1. If you are promising something (especially anything that will result in a payment), put it in writing. In fact in some states, written agreements have now become mandatory—so know your local laws.
2. If you use metrics or performance standards to determine bonuses or incentives, frequently report monthly or YTD results for everyone involved to see. For broadly-based “profit-sharing” bonuses or programs, report key results to everyone in the building.
3. Be honest and open with your employees regarding their performance and how you see it. Are your annual performance reviews just a feel-good exercise for delivering a raise and a smile on both sides of the table? If so, trouble is lurking in your future—and you should have the phone number of your labor counsel handy. If an employee is not doing the job you expect, tell them now and tell them again until you are sure the message has gotten through.
4. Be clear with your managers and staff regarding how you will determine and deliver their compensation. Be prepared to share both the whys and hows.

Notice that the common characteristic of each above prescription includes the phrase “tell them” in it. Further, notice that you control the information and facts. There will be little room for rumors or inaccurate interpretations of fact (or fiction). I have never seen an executive or manager hurt by over communication with their staff.

And finally, if you sense that your team or staff harbor basic misunderstandings of fact or intent that will lead them to future unreasonable expectations, trust your “gut” because you are probably right. Act quickly and get out in front of the problem. Assure everyone is on the same page before the situation potentially explodes—all over both of you. You truly have nothing to lose.

So when in doubt, tell them.

Wilkening & company has assisted clients for over 30 years with setting, meeting and rewarding employee and stakeholder expectations. Having trouble aligning expectations with reality. Give us a call at (847) 823-5090.