By Mike Pallin, President of The Floyd Wickman Team, LLC Floyd directed my attention to an article in the Harvard Business Review recently, entitled, “How To Really Motivate Salespeople.” I was eager to dive in because our company has been in the salespeople-motivating business for over thirty years, and I was curious if the good and educated folks at the Harvard Business Review had discovered something new.
It turns out the research was all about how different commissions, bonuses, salaries and quotas influence the behavior of salespeople and, ultimately, the profitability of a business. Up until just recently, most of the research on how compensation motivates salespeople has been academic. But one of their field experiments was pretty interesting. Here’s a quote:
“For one of our experimental groups, we created a bonus that was payable at the end of the week if a rep sold six units. For another group, we framed the bonus differently, using the well-known concept of loss aversion, which posits that the pain people feel from a loss exceeds the happiness they feel from a gain. Instead of telling reps they would receive a bonus if they sold six units, we told them they would receive a bonus unless they failed to sell at least six units. To test the concept even further, the company’s managers suggested another experiment in which we paid the bonuses at the beginning of the week and then had the reps return the money if they missed the goal. The results showed that all three types of bonuses exerted similar effects and that in every case the group receiving the bonus generally outsold the control group (that received no bonus.)”
“If money really motivated salespeople, real estate agents would be at FSBO doors by 6am with an ax.” -Floyd
Motivation is not necessarily logical.
I did a field experiment with one of my recent classes. I asked what was their average commission per closing. It was (in this hypothetical field experiment) approximately $3000. Then I asked what percentage of their listings sell and close? It was 80%. So we took 80% of $3000 and came up with each listing obtained was worth approximately, hypothetically $2400 to them.
Then I asked how many listing appointments they needed to go on to get one listing. The average was one out of three. So we divided $2400 by 3, to get an average value of $800 per listing appointment.
Here’s where I had to cross my fingers behind my back, because I offered the following: If I gave you $800 next week for every listing appointment you went on in the next 6 days, how many appointments would you go on?
The most common answer was, “As many as I could!” followed by, “At least one or two a day.” A number of people said, “12!” Then I had to break the bad news, that I wasn’t really going to give them $800 for each appointment; but the good news was they would be giving themselves $800 for each appointment.
(By the way, they actually attended an average of 2.1 appointments.)
It’s not the money that motivates salespeople to do the activities that result in production, but fair and simple compensation is a must. When it comes to compensation plans, I agree with HBR:
“On the basis of my own research, I would advocate for a pay system with multiple components—one that’s not overly complicated but has enough elements… to keep high performers, low performers, and average performers motivated and engaged throughout the year. “
“Some people compare the way people compensate a sales force to the way teachers motivate students: Top students will do fine in a course in which the entire grade is determined by a final exam, but lower-performing students need frequent quizzes and tests during the semester to motivate them to keep up. Our study showed that the same general rule applies to sales compensation. “
That’s just good common sense when it comes to compensation. Now here are 5 things we have discovered that really motivate salespeople in addition to compensation.
- The confidence that comes from developing competence.
“People are as good or as bad as we train or allow them to be.” That’s one of Floyd’s Management Philosophies, and one of the foundations of our program. The greatest satisfaction I get as a trainer is watching our students radiate confidence when they begin to master Floyd’s dialogues by applying them in the field.
- The experience of measurable progress toward a goal.
Experiencing progress is the essence of motivation. Seeing is believing, and so is hearing, touching and feeling. That’s why tracking and reporting SMART Numbers every week is so important. That’s why Floyd makes us chart progress visually and report it verbally.
- The public recognition of that progress.
Rewards and recognition amplify and magnify the effect of progress toward a goal. Money is the end result, but rewards and recognition come incrementally along the way. It’s a scientific truth that as a manager, you will get more of the behavior you pay attention to. A star stamp on a t-shirt for each listing obtained. An autographed book for a success. A round of applause. Never underestimate the power of a sincere, public pat on the back.
- Accountability for making progress while contributing to a team effort.
When you can get individuals to commit to a team effort, and when each member of the team knows what every other member of the team is contributing, it creates a sense of belonging to something greater than just the individual. A bigger picture. A reason to set aside personal procrastination and contribute to the team. I have heard this hundreds of times - “I didn’t make my calls for me this week. I made them so I wouldn’t let my team down.”
- Actively participating on a team working together in a spirit of harmony toward a common goal.
The ‘spirit of harmony’ is the tricky part of creating a team. The best teams begin with a common goal, which can be as simple as the combined total of the individual goals.
The best teams also have minimum standards to be considered for membership; to get in; and to stay in. The best teams figure out ‘integrated activity,’ that is, each person doing the things they are best at that will contribute to the goal. And the best teams need the right leader. All the other ingredients in place with the wrong leader will get the team charged off in the wrong direction.
The right leader will motivate some of the team. The common goal motivates some. The individual commitment motivates some. The minimum standards motivate some. And the clear direction of the integrated activity motivates some.
Throw in the money and that’s what really motivates salespeople.