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Monday, May 23, 2005

Businesses Planning to Increase Productivity .... So what's new?

I just read a recent e-BizJournal article about Watson Wyatt's new survey that indicates U.S. companies are launching a push to raise performance goals and sales quotas. ?? This is NEW? I'm wondering if there was ever a time when survey results came back and showed companies were absolutely pleased about their performance and weren't going to do a thing. Silly.

It was interesting, however, that the report said more performance-based pay programs are being put in place for sales units. From my experience in a sales and client management role for JPMorganChase, I know that the performance-based pay programs are a double-edged sword.

There are two kinds of sales; transactional sales (retail sales, car sales, medium to small price-tag sales) and relationship sales (big ticket sales, sales that require a major transition of process, assets or a physical relocation).

I think that pay programs based exclusively on performance (i.e. closed sale) are more appropriate for the transactional sale where, if you lose one deal, you've got 10 more potential closes the next week. Relationship sales typically take months or years to develop. You may have an opportunity to close 10 deals all year, if that many. You tend to have less of an opportunity to recover quickly from a loss on those big, relationship sales that took you 2 years to get them to the table.

Also, depending on the structure of the company, there can be so many things outside of the control of the sales person that can break a deal. I hesitate to dwell on this because, while it is true, so many sales people point the finger at the boss, at operations, at accounting, everywhere else when the deal falls through. I know there are sales people out there that would be so much more successful if they would just take responsibility for themselves and do their job. However, when you're asked to sign up a client on a premium fee schedule because your operation costs are twice that of the competition's, it makes it tough for the sales person to win - and perform.

Watson Wyatt looked at 186 companies with more than 100,000 sales professionals and found that 75 percent have increased the 2005 performance goals and quotas that sales representatives must achieve to earn a commission or bonus. Twenty percent left their quotas where they've been, while 5 percent lowered them. (wonder who they were?)

Watson Wyatt also found that employers are expanding their sales forces at the highest pace in nearly five years. One of three employers plans to increase the sales team staff in 2005 while the percentage of companies that reported trouble attracting key sales talent increased from 82 percent in 2002 to 92 percent in 2005.

Hmmm. 75% of the companies increased the performance goals and quotas and 92% are having trouble attracting talented sales people.

What do you think? If you're in sales, tell me how your compensation / bonus program is has changed recently, if at all.

If you're a business owner with a sales staff, what do you think?