Does your sales force have the summertime blues?

I do not have to tell you that we are now being visited by the hot and lazy days of summertime. The calendar says so, and signs are all about.  And just like the weather, sales forces can have a tendency to get a bit lazy and rudderless when summer is in high session. I call it the "summertime blues." Here are a few sure signs to watch for— The number of physical sales calls drop like a rock—"you know, no one is ever around during the summer anyway, and they really prefer to speak with me by telephone." Prospects and potential customers get virtually no attention. It takes nearly 48 hours to personally get in touch with anyone from the sales force. The number of sales representatives meeting or exceeding their sales goals or quotas drop by half from the prior couple of months. There is no need to look at the calendar if the above is occurring, it is summertime and your sales force has a case of the blues. What causes this to occur? There is a long-held belief that sales forces are generally self-directed and only need financial motivations or rewards to be directed to achieve expected sales results. In such a world who needs a sales manager? Our theory is that while sales forces are more self-managed than other employees, job structure, high expectations and planning are still (and always) required to assure sales force effectiveness. Summer is a quiet time for managers as well as sales forces. It is our experience that normal expectations for the sales force become lax (or loose) during those months and sales representatives can tend to readily and quietly wander off task while no one is looking. It is a bit of a tradition, but does not have to be. And, such behavior is not isolated to only the sales force. What should the prudent company do? We think the cure is simple: double down on your summertime sales-force expectations! Here are four examples for how to improve sales energy level and focus for the months of June through August: Summer is a wonderful time for cold calling. Double your physical cold-calling quota for the summer months. If you expect 5 per month, increase the number to 10. Give your sales force the lead information required to support this effort and set a 3-month goal for closing business with new customers. Throw in a $1,000 bonus check or two to spice up the process and reward the people really doing the work. If you expect your sales force to make 15 calls per week on select customers, then they must continue to expend that same effort during the summer months. If a client is on vacation and unavailable, find then another client to call upon. No excuses, just plenty of hot-weather sales calls completed. [I actually like summer sales calls; I find one can be more productive.] Realign your monthly and quarterly sales goals at the beginning of the New Year and ask for more sales production and closes during the summer months—if you do not already. Having to reach a little higher makes people work a little harder. [Now, I do not want any cards or letters next year from any of you saying that you tried my idea in 2012 and all it did was create a bad case of "the spring blues."] Make summer a prime time for passing knowledge and skills from senior employees to those new to the company or sales force. Many call this process mentoring. As such, pair a senior sales rep with a rookie for a month or more—in either a territory or to develop and service client portfolio. We believe that it is a valuable exercise for both parties. Particularly, it makes the senior sales rep think about: What is important about each step the sales process; How they must execute each; and Most importantly, how do they explain this mystery of life to a rookie? While some would argue that there could be a loss in productivity in such a pairing, we believe that the formation of this loose team will likely both increase productivity and sales force focus. And, neither party is ever alone to get lost in those summer weeds. In short, keep your sales force busy during the summer and they will get more done. It may take a bit more work for the sales managers, but it will pay dividends for the employee and company. Is your sales force experiencing the summertime blues? If you do not like my work plan, create your own—the secret is acting before you lose the attention of the sales force for the next couple of months.

Will employers be dropping health-care coverage for employees in 2014 as the result of The Patient Protection and Affordable Care Act? New information is emerging.

In August 2010, Wilkening & Company discussed our view of the landscape facing both employers and employees as the result of enactment of the 2010 Patient Protection and Affordable Care Act (PPACA) in the coming few years. In short, we felt that employers would have strong incentives to drop long-standing employee health-insurance coverage for major groups beginning in 2014. Consequently, it can be expected that many will do so. 

It was our assessment that employers will be highly motivated to drop employee-sponsored insurance (ESI) in 2014 because insurance pools will become available as a ready alternative to company-sponsored employee health insurance, and new rules and financial penalties (incentives) will present cost-savings opportunities for employers. The economics were (and remain) quite compelling. However, our intuitive conclusions seemed to run contrary to the original Congressional Budget Office (CBO) estimates that stated only 7% of employers (representing 9-10,000,000 estimated employees) would drop coverage. We just seemed to disagree, at the time.

In early June 2011, the consulting firm of McKinsey & Company published the findings and conclusions of a study it recently conducted on the subject. It was entitled: How US health care reform will affect employee benefits. The report is the result of opinion and proprietary research. In their work, they surveyed 1,300 employers across industries, geographies and employer size. They interviewed each regarding such matters as: their current understanding of PPACA provisions, what they planned to do at its advent in 2014, and why.

The reported results of the McKinsey survey were more consistent with our earlier analysis and in stark contrast with 2010 CBO estimates.

There were many findings of the study, but we believe two were very material to the actions employers must take or consider in the coming months.

• McKinsey's survey results found that on average 30% of employers plan to drop ESI coverage for some or all of their employees in 2014 and that ratio could be as high as 60%. (It appears that those survey respondents that are more familiar with the provisions of PPACA today said they are more likely to drop employee health-care insurance.)  That is nearly eight times the CBO estimate and suggests 70-80,000,000 employees may involuntarily be moved to government insurance pools. The term "drop" is used above to describe ceasing employee health insurance coverage, but it does not mean you can (or will) wash your hands of the employee and the cost of health-care insurance. It is widely believed that companies that drop ESI will also use compensation dollars to bridge the part of the new employee insurance cost that is not picked up by the Feds. Also it is believed that when employees are in a position to select their own coverage, they will select more cost-effective alternatives tailored for individual need.
  
• Contrary to what many employers assume, the McKinsey report concludes that 85% of employees would remain at their jobs even if their employer stopped offering them ESI—and not go to another employer who retains insurance coverage. As we said above, dropping ESI does not mean a clean break with your employee—they are very likely to remain with you, company-sponsored coverage or not.
  

The McKinsey survey has proved to be quite controversial during the last month in some parts of Washington DC for obvious reasons. [They must not have read my August 2010 E-Notes.]

As you may recall In our August 2010 article, we made broad recommendations to our employer-readers regarding what they should do to prepare for 2014. We still believe these actions remain quite valid (and likely even more so in light of the McKinsey survey findings). Let me again reprint these below.

The prudent company will begin to develop its future employee healthcare strategy and corresponding compensation strategy as soon as possible. While we have only discussed a well-paid employee in our example, also recognize that lower-paid employees may be eligible for federal subsidies through exchanges that will impact your cost and decision making in a variety of other complex ways. We recommend that you strongly now consider— A full analysis of your work force and healthcare costs and demographics; An analysis of cost scenarios under current PPACA rules; Development of 2011-2014 healthcare and compensation strategies in light of PPACA requirements; and Creation of an action plan to respond quickly and implement required changes in the event of inevitable PPACA rule and deadline changes. While you technically have plenty of time to consider and act, we suggest you anticipate that changes will surely occur in this arena that will negatively impact your company if you are not ready to respond and act in your own defense—what do they say; the prepared will survive?

As an employer, you should also begin to anticipate questions from your employees regarding health-care economics and decision making. Many have never had to do this in the past and will likely need your help and guidance throughout the process. The greatest benefit you can provide is to support and restore the employee's peace-of mind as they transition through the uncertainty that 2014 will certainly bring—to everyone. Clearly, while you may choose to drop their ESI (and send them to the pool), they may still very likely remain your employee. You must assure them that dropping ESI does not mean being fired or enduring a large pay cut. (Help!)

A year ago we said that time was of the essence for employers wanting to prepare for 2014. Today nothing has changed, only you have a year less to do so.

Wilkening & Company has developed information and methodologies to assist clients in the selection of 2011-2014 insurance and compensation strategies. We will continue to cover this evolving and changing mandates for our readers in future issues of the Corner Office Gazette.

Planning to Improve the Effectiveness of your Compensation Committee

Wilkening & Company believes that it is essential that the Compensation Committee (or any other Committee) of the Board of Directors plan and allocate its resources to address those issues or decisions that they will regularly face each year. In addition, the Committee must leave time for those last-minute emergencies that always arise. This is a challenge that any Committee or Board can successfully address if it looks ahead.

By planning ahead, we mean that the Board should:

1. Establish or identify all known annual agenda items for the Compensation Committee to consider or act upon each year; and
2. Place each on an appropriate Committee meeting agenda.

Agenda items can either require action or merely provide background, information or updates to the Board or its Committee.

As an example of what we suggest, let us assume that the Board of (a fictitious) XYZ Corporation establishes four meetings each year for its Compensation Committee. This is a common meeting practice and frequency that is often tied to the meeting schedule of the full Board. Then, let us create a possible draft 2011-12 planning calendar for the Compensation Committee arranged by meeting. That example is shown below.

Draft Compensation Committee Planning Calendar for XYZ Corporation
2011-2012

Committee Meeting	Action Items Planned	Subjects for Board Consideration or Briefing
November 2011	Approve goals for 2012 annual and long-term incentive plans Approve salary structure and pay increase budgets for 2012 Approve benefit plan structure for 2012	Review year-end 2011 incentive forecasts and projected profit reserves Review of HR budgets, staffing & investments Review HR and compensation "dashboard"
February 2012	Approval of 2011 incentive payouts Approval of profit-sharing/benefit contributions for year past (distributed) in 2012 Selection of Board advisor(s) for 2012	Evaluation of current incentive plans versus best practices & select benchmarks
June 2012	Establish CEO compensation plan for coming 12 months Approval changes to 2013 compensation strategy or incentive plans, as recommended	Report on officer succession planning by CEO Report on CEO succession planning by Chair Annual evaluation of CEO performance Review HR and compensation dashboard
August 2012	Re-approve and acknowledge all compensation contracts (non-LTI) over pre-set limit	Compliance briefing on all federal, state or local regulations impacting people or pay Informational briefings, as selected by Board

Note that in the proposed November meeting subjects for Board consideration and briefing (last column); we include an agenda item called: "Review the HR and compensation dashboard." In our example it occurs in both November and June. This falls into the category of reviewing standard information and metrics regarding productivity, cost or risk. We find it helpful for management to discuss these metrics with the Committee at the opening of every (or every other) meeting. In our experience, such a report is brief (one page) and contains such matters as—

• Trends in employee retention or turnover;
• Trends in employee productivity—sales per, units per, profit contribution per;
• Trends in compensation and benefit costs in aggregate and per employee;
• Open and unfilled positions in key job titles; and
• Known and imminent risks to company impacting employees, pay or benefits.

Some may consider this too much detail for a Compensation Committee to see. Maybe, but I would suggest that a bit of forewarning could be an actual cost and time saver for the Board, and the company.

The proposed planning calendar presented above does not leave much time for the unknown issues that arise and will require the rapid attention of the Compensation Committee. In our experience, 25% or more of the Committee's time can be taken by those unknown problems that always seem to roll in over the transom. There is no way to plan for this other than to allocate extra meeting time. In short, more time than planned may be (will be) needed to conduct all of the Board's business. At least your planning calendar will determine the baseline requirement of work to be done at each meeting.

Does your company have a planning calendar somewhat like the one we have drafted for XYZ Corporation? If so, I am sure you will agree that it helps in improving the productivity of the Committee. If not, put one together before the next meeting and see what the Board thinks—bet they like it.

Clearly, a planning calendar can have benefits for all Board Committees, or the Board as a whole. I use one just like this for a Board on which I sit. Sure helps the Chair (me) be sure the Board and management are getting everything done—as agreed and on time.