RAB Radio Training Academy Performance Based Compensation Holding the carrot in the right direction Consumer Marketing RAB Radio Training Academy I like my life a whole lot better when I make quota. I am far less likely to kick the dog or hang up on my brother-in-law. Performance Based Compensation ~ Anonymous Sales Manager 1.For YOU to make quota, your SELLERS must make quota! 2.How do we keep THEM focused on the same job WE are focused? RAB Radio Training Academy Corporate Culture Influences Manufacturing focused Product quality, features, efficiency Reps not valued see this as a place to spend time until a real job Numbers focused Profit, revenue, growth Reps, especially good ones, turn over Numbers dont come in, you go hungry Market focused Great value on customer relationships Market based strategic goals Manufacturing focused Product quality, features, efficiency Reps not valued see this as a place to spend time until a real job Numbers focused Profit, revenue, growth Reps, especially good ones, turn over Numbers dont come in, you go hungry Market focused Great value on customer relationships Market based strategic goals Source: The Sales Compensation HandbookPerformance Based Compensation RAB Radio Training Academy Manufacturing Focused Product quality, features, efficiency Source: The Sales Compensation Handbook Sales Repetition Products are substitutable Sellers role is minor (Google) Sales Repetition Products are substitutable Sellers role is minor (Google) Performance Based Compensation RAB Radio Training Academy Numbers Focused Profit, revenue, growth Source: The Sales Compensation Handbook Short selling cycle Incidence of sales is predictable High number of tansactions Short selling cycle Incidence of sales is predictable High number of tansactions Performance Based Compensation RAB Radio Training Academy Market Focused Great value on customer relationships Source: The Sales Compensation Handbook No two sales alike Incidence of sales is unpredictable Sales situations are multifaceted Customer seeks solutions, not products No two sales alike Incidence of sales is unpredictable Sales situations are multifaceted Customer seeks solutions, not products Performance Based Compensation RAB Radio Training Academy Job description Advertising Recruiter Your time Aptitude testing References and background checks Interviewing Orientation and initial training Job description Advertising Recruiter Your time Aptitude testing References and background checks Interviewing Orientation and initial training Cost of Recruitment Double the cost of annual compensation Performance Based Compensation RAB Radio Training Academy Guarantee Draw or salary Commissions Bonuses Incentives Vacations Training Legal Guarantee Draw or salary Commissions Bonuses Incentives Vacations Training Legal Cost of Compensation Hard costs Health insurance Life insurance Dental insurance Client expenses (entertainment) Special expenses (i.e. parking) Severance Unemployment Health insurance Life insurance Dental insurance Client expenses (entertainment) Special expenses (i.e. parking) Severance Unemployment Performance Based Compensation RAB Radio Training Academy Parties and station employee events Group activities Banquets and awards presentations Bonus time off Flex-time Parties and station employee events Group activities Banquets and awards presentations Bonus time off Flex-time Other Retention Costs Performance Based Compensation RAB Radio Training Academy Reward performance Establish loyalty Reinforce or modify behavior Reward performance Establish loyalty Reinforce or modify behavior Purpose of Compensation? Performance Based Compensation RAB Radio Training Academy What kind of performance do you want to reward? What kind of behaviors would you like to reinforce or modify? What kind of performance do you want to reward? What kind of behaviors would you like to reinforce or modify? Purpose of Compensation? Performance Based Compensation RAB Radio Training Academy Selling goals Making goal Exceeding goal Missing goal Business type Agency Direct New Category Business model Alternative Revenue Internet Multi-platform Non-spot Selling goals Making goal Exceeding goal Missing goal Business type Agency Direct New Category Business model Alternative Revenue Internet Multi-platform Non-spot Reinforce / Modify Behavior Business objectives Inventory maximization Special events Cluster selling Weaker stations Category business Long-term business Management objectives CNAs Written proposals Testimonial letters Collections Co-op utilization Business objectives Inventory maximization Special events Cluster selling Weaker stations Category business Long-term business Management objectives CNAs Written proposals Testimonial letters Collections Co-op utilization Performance Based Compensation RAB Radio Training Academy Straight commission Some variation based on type of business Draw against commission Small salary for new hires (3-6 mo) Two weeks vacation Make budget and keep your job! Straight commission Some variation based on type of business Draw against commission Small salary for new hires (3-6 mo) Two weeks vacation Make budget and keep your job! The Traditional Model Allow us to reward performance and reinforce / modify behavior? Performance Based Compensation RAB Radio Training Academy It attracts high performers willing to share risks Gets rid of non-performers Compensation costs easy to understand, completely variable Encourages maximum sales effort Allows us to treat reps like independent contractors It attracts high performers willing to share risks Gets rid of non-performers Compensation costs easy to understand, completely variable Encourages maximum sales effort Allows us to treat reps like independent contractors Straight Commission? Performance Based Compensation RAB Radio Training Academy Reps success cant be measured completely and accurately in a short time Longer selling cycles for BIG dollars Seasonality makes it hard to meet bills Reps need to do more than just sell (service, receivables) Crates conflict between sellers need to sell volume vs. stations need to focus on profitability Leads to turnover Reps success cant be measured completely and accurately in a short time Longer selling cycles for BIG dollars Seasonality makes it hard to meet bills Reps need to do more than just sell (service, receivables) Crates conflict between sellers need to sell volume vs. stations need to focus on profitability Leads to turnover Straight Commission? Performance Based Compensation RAB Radio Training Academy Attracts reps who have more than pure selling skills Helps retain key employees in tough times Allows management to direct salespeople in non-selling activities Still keeps tight link between pay and performance Allows companies to construct career paths based on selling and non-selling skills Attracts reps who have more than pure selling skills Helps retain key employees in tough times Allows management to direct salespeople in non-selling activities Still keeps tight link between pay and performance Allows companies to construct career paths based on selling and non-selling skills Salary Plus Commission? Performance Based Compensation RAB Radio Training Academy Can be overly complex Can be RUINED when management designs plans that try to micromanage salespeople Higher fixed level cost relative to commission only plans Can be overly complex Can be RUINED when management designs plans that try to micromanage salespeople Higher fixed level cost relative to commission only plans Salary Plus Commission? Performance Based Compensation RAB Radio Training Academy Allows rewarding of volume AND quality of the business generated Allows management to direct and reward performance of important non- selling activities Allows for flexibility to realign territories or reassign accounts without affecting the reps pay Allows rewarding of volume AND quality of the business generated Allows management to direct and reward performance of important non- selling activities Allows for flexibility to realign territories or reassign accounts without affecting the reps pay Salary Plus Bonus? Performance Based Compensation RAB Radio Training Academy Depending on performance measures selected, management may not be able to accurately predict compensation as a percentage of sales Tempts management to create plans that are complex, unfocused and difficult to administer Allows for plans that reward activities rather than objective, measurable results Depending on performance measures selected, management may not be able to accurately predict compensation as a percentage of sales Tempts management to create plans that are complex, unfocused and difficult to administer Allows for plans that reward activities rather than objective, measurable results Salary Plus Bonus? Performance Based Compensation RAB Radio Training Academy Salary Commissions on personal performance Bonuses / rewards on personal performance Bonuses / rewards on group performance Non-financial rewards & incentives Recognition Salary Commissions on personal performance Bonuses / rewards on personal performance Bonuses / rewards on group performance Non-financial rewards & incentives Recognition The Performance Model Allow us to reward performance and maintain reasonable cost of sale? Performance Based Compensation RAB Radio Training Academy Treat Everyone the Same? You build strong teams by treating individuals differently. Everyone has to feel that they have a stake in the game, but that doesnt mean that everyone has to be tread the same. ~Jack Welsh, Chairman, GE Corporation Performance Based Compensation Fair not necessarily equal RAB Radio Training Academy Customized compensation plans Company goals Management objectives Sellers goals Sellers expertise Sellers proven ability Sellers work style Sellers hot buttons Customized compensation plans Company goals Management objectives Sellers goals Sellers expertise Sellers proven ability Sellers work style Sellers hot buttons Individual Compensation Performance Based Compensation RAB Radio Training Academy Performance Compensation Customized compensation plans Collaborative Personal Immediate Certain Flexible in certain circumstances Goals Specific Measurable Achievable Compatible Time-bound Customized compensation plans Collaborative Personal Immediate Certain Flexible in certain circumstances Goals Specific Measurable Achievable Compatible Time-bound Performance Based Compensation Lack of goals lead to lack of focus RAB Radio Training Academy Performance Compensation Dont overlook the value of non $$ Trips Training Dinners Tickets clothes Time off (with pay) Thank-you notes Dont overlook the value of recognition Awards Celebrations Support Dont overlook the value of non $$ Trips Training Dinners Tickets clothes Time off (with pay) Thank-you notes Dont overlook the value of recognition Awards Celebrations Support Performance Based Compensation RAB Radio Training Academy Determine goals and objectives Company Management Individual Prepare detailed job description (Job clarity = job satisfaction) Do the math Calculate old program against new Achieve goals and objectives Maintain or reduce cost of sales Determine goals and objectives Company Management Individual Prepare detailed job description (Job clarity = job satisfaction) Do the math Calculate old program against new Achieve goals and objectives Maintain or reduce cost of sales Planning Compensation Performance Based Compensation RAB Radio Training Academy Decide how you want to reward results WRITE IT DOWN Solicit input Get buy-in of overall plan Senior sellers Entire team Treat everyone fairly and equitably Be patient change is hard Consequences for under performance Communicate clearly Be firm Decide how you want to reward results WRITE IT DOWN Solicit input Get buy-in of overall plan Senior sellers Entire team Treat everyone fairly and equitably Be patient change is hard Consequences for under performance Communicate clearly Be firm Planning Compensation Performance Based Compensation RAB Radio Training Academy Veterans Making a lot of money May think they have a birthright to their list Veterans Making a lot of money May think they have a birthright to their list Chances Are You Have Two Sales Staffs Performance Based Compensation Up-and-comers Your future Not making big money because key accounts really are taken Up-and-comers Your future Not making big money because key accounts really are taken Redistribute some accounts AND make everyone happy! RAB Radio Training Academy Performance Based Compensation A B C RAB Radio Training Academy Performance Based Compensation A B C Your future RAB Radio Training Academy Is there a commission plan that motivates the 30% of your team that has 80% of the billing back into the behavior that made them super stars? Performance Based Compensation RAB Radio Training Academy Food for thought Performance Based Compensation RAB Radio Training Academy Our Senior AEs Responsible for our BIG number Are sometimes spending BIG time on small accounts We want them to spend BIG time on BIG potential billing Therefore the insurance industry model... Responsible for our BIG number Are sometimes spending BIG time on small accounts We want them to spend BIG time on BIG potential billing Therefore the insurance industry model... Performance Based Compensation RAB Radio Training Academy The SAT System (Senior Account Transfer) From the Insurance Industry Performance Based Compensation RAB Radio Training Academy How it works Senior has average account value of $5,000 p/m (Money On Month, or MOM) Steady High of $10,000 Steady Low of $500 Start moving accounts less than (say) $750 per month to Junior list Senior has average account value of $5,000 p/m (Money On Month, or MOM) Steady High of $10,000 Steady Low of $500 Start moving accounts less than (say) $750 per month to Junior list Performance Based Compensation RAB Radio Training Academy The SATS System Senior doesnt have time to improve Low Money On Month Accounts, but Junior has time! Lets pay Junior to work them, and Senior to mentor Junior Senior Junior 1st Qtr75% 25% 2nd Qtr50% 50% 3rd & TFN 25% 75% Junior thinks its a big deal -Needs Seniors help Senior gets billing from ever increase accounts...and starts to help you LEAD the team! Still have fallback person if Jr. leaves! Senior doesnt have time to improve Low Money On Month Accounts, but Junior has time! Lets pay Junior to work them, and Senior to mentor Junior Senior Junior 1st Qtr75% 25% 2nd Qtr50% 50% 3rd & TFN 25% 75% Junior thinks its a big deal -Needs Seniors help Senior gets billing from ever increase accounts...and starts to help you LEAD the team! Still have fallback person if Jr. leaves! Performance Based Compensation RAB Radio Training Academy A Couple Other Ideas New sellers get 50% on any orders they write within 1 st 120 to 180 days at the station Sliding Scale: X% for 90% or less, Y% for 100%, Z% for over 100% New sellers get 50% on any orders they write within 1 st 120 to 180 days at the station Sliding Scale: X% for 90% or less, Y% for 100%, Z% for over 100% Performance Based Compensation RAB Radio Training Academy Team bonuses for entire staff Quarterly make-good options Customer satisfaction rewards Rewards for customer retention Rewards for collection results Sliding scale on all reward systems Praise in public; reprimand in private Make sure contest are fair and fun Team bonuses for entire staff Quarterly make-good options Customer satisfaction rewards Rewards for customer retention Rewards for collection results Sliding scale on all reward systems Praise in public; reprimand in private Make sure contest are fair and fun More Food For Thought Performance Based Compensation RAB Radio Training Academy Performance Based Compensation Holding the carrot in the right direction Consumer Marketing