Aligning Sales Pay with Cold Calling

During recent months we have focused upon the issue of cold calling by the sales force. Much of our discussion has been from an operational or organizational perspective. With this article we will now turn our focus to reward and motivation.

Some would say that successful cold-calling by your sales force will be rewarded as increased sales and profits drive increased commissions and bonuses. While this is both true and logical, we have found that the actual results of cold calling can occur a year or more after the calls are actually made—i.e.: you do the work this year, and may not see a dollar of sales or profit until next year. Cold calling is often an investment of time and effort with future payoffs (that may or may not occur). Hence, traditional sales pay plans and cold calling can sometimes be tough to align.

However in our experience, there are successful ways to create such an alignment. Following are three examples:

1. A sales bonus for completed cold calls. To lay a solid foundation for cold calling, it is our belief that a company should ask each and every member of its sales force to complete a certain number of sales calls on new and prospective accounts annually. While every company has to decide upon its own “quota” we believe that if less than 10-15% of all sales calls are allocated to new accounts, you may be losing share of market—in a slow and subtle process.
   
   You can decide you want each of your sales reps to make (say) 150 annual calls on new accounts with which the company has never done business. To assure this new task is done, pay a modest quarterly bonus if their assigned cold-calling quota is met. Of course this says nothing about success of the calls or quality of each, but it does get the sales force’s immediate attention. This is particularly true if cold calling has not been measured in the past, or you want to reemphasize it this year.
   
   
2. A bonus for new business. If regular cold-calling is part of your sales culture you can pay an annual bonus to members of the sales force for achieving expected levels of new sales or gross profit generated by customers which were not on company rolls last year. Say you want $300,000 of 2013 sales from “new sources” this year, if a sales rep achieves that goal they will receive a commensurate bonus at year end—and may earn more or less based upon actual results. The purpose of this reward is to reinforce a cold-calling sales culture and persistently assure that those sales calls (of last year) result in positive outcomes (this year).
   
   Now some would argue that sales from new sources may not only be the result of cold calling. That is technically true, but all sales from new accounts (however sourced) are likely good business for the company and should be nonetheless rewarded.
   
   By the way, do not forget your sales managers. They should also participate in this type of new-business bonus as they are the direct overseers of the company’s cold-call efforts.
   
   
3. Do not change your current pay system, but openly measure (and recognize) cold-calling efforts and success. Whether you currently have or are introducing a cold-calling culture to your company, start to measure cold-calling activity (and closings). Every month share results amongst all sellers and managers.
   
   It is well known that you do not have to use actual dollars to either change or reinforce behavior. Sometimes the mere measurement of results will make sellers want to succeed and be seen to be the best at accomplishing a tough task.

We have found that a particularly effective way to reinforce cold calling and the development of new-customer business is to use a combination of both #2 and #3 above jointly. You will find they are a good complement to one another.

If cold calling (or the attraction of new accounts by the sales force through any means) is important to the success of your business—and it should be, find a way to reward and recognize success in cold calling and new business generation, in general. As you have seen, you can use $100 bills, performance reports or other means to get the job done. But remember, cold calling activities require both visibility and feedback to assure success. Just saying “we want our sellers to increase their cold calling,” is meaningless without benchmarks and reinforcement. How do you measure and recognize cold-calling success?

Wilkening & Company has published a number of articles on the subject of sales force performance & pay. To read earlier articles on cold calling or other subjects, go to www.wilkeningco.com and type in your subject of interest at our Search Our Site prompt. If you have additional questions, please call or write.

Is My Company’s Culture ‘Performance Based’?

Recently, I have had the privilege and opportunity to speak with owners and senior executives of privately-owned companies regarding the subjects of compensation strategy, planning and pay practices. In such discussions, the subject of employee, shareholder-employee or partner performance will invariably arise. A typical question asked is: How should differences in employee performance and contribution be recognized within a company’s compensation system?

The answer to that question depends upon a variety of factors and generally involves a mix that includes: job definition, expectations and variable compensation design. It is not our intent to try to discuss such a broad and open-ended question in this article—we will save that for another day. However, we generally suggest to a client or meeting participant that the best way to avoid pay and performance confusion within any organization is to develop & employ a performance-based culture. We believe this is a crucial first step. But, what do I mean by a performance-based culture?

A definition could be long, wordy and pretty abstract. But, let’s look at this from another perspective. Instead of a definition, let’s ask what are the typical characteristics that we see in a company with a performance-based culture? Here are six characteristics we most often observe:

1. Everyone in the organization clearly understands their job and what is expected of them. [This also includes partners, stakeholders or family employees, if applicable.]
2. Every job in the company has measurable benchmarks or standards of performance, and job incumbents know how they are performing.
3. Employees place the practice of high-quality customer service at the top of their job’s priority list.
4. Employees understand that they are responsible to both customers and peers for their actions and performance and are willing to shoulder that responsibility come good or bad.
5. Employees in the organization are willing to collectively do what it takes—whether part of their job or not—to meet customer (or company) requirements.
6. The company (and its owners) treat & pay its employees fairly, and employees know it.

Notice that the above emphasizes both personal & company responsibility and an acknowledgement that premier customer service is a requirement for premier company performance.

Do you recognize your company when you read the above characteristics? If so, your organization is likely an industry leader and has built pay & reward systems that effectively and fairly recognize individual performance and contribution.

If not, take out a piece of paper and chart your company’s performance or cultural deficits and why these exist. There generally will not be any mysteries, only a reluctance to recognize the problems.

So why is it important to have a performance-based culture? It is if you think it is a good idea to put a few extra points to the bottom line this coming year and attract top industry leaders to your organization. If you doubt that is possible, do some fixit work to improve the performance bias of your company and see what happens.

Wilkening & Company has assisted companies 30 years with improving company group and individual performance. If you want to talk more about performance-based cultures, and your company, feel free to call or write.