JFK and the Janitor

At beqom we provide a solution to make your people happy.   We firmly believe that 3 of the key tenets in employee happiness are:

• Clear Direction - Understanding the corporate vision
• Alignment - Knowing your part
• Motivate - Understanding how you will be compensated

At a company meeting I overheard someone describing the JFK and the Janitor story to a colleague.   I had never heard the story of JFK and the Janitor before, but immediately after reading the story for myself a couple of ideas clicked together.   The idea of understanding the vision of the company linked in my head with Motivation 3.0 theory of purpose the desire of people to be part of something that is bigger than they are.   Total Compensation, Motivation & Productivity are all tightly linked.  

If you don’t know the story here it is:

President John F. Kennedy was visiting NASA headquarters for the first time, in 1961. While touring the facility, he introduced himself to a janitor who was mopping the floor and asked him what he did at NASA. The janitor replied, “I’m helping put a man on the moon!”

The janitor got it.   He understood the vision, and his part in it, and he had purpose.     While looking for the JFK and the Janitor story I found another similar story:

“Perhaps you have heard the story of Christopher Wren, one of the greatest of English architects, who walked one day unrecognized among the men who were at work upon the building of St. Paul’s cathedral in London which he had designed. ”What are you doing?" he inquired of one of the workmen, and the man replied, "I am cutting a piece of stone." As he went on he put the same question to another man, and the man replied, "I am earning five shillings twopence a day." And to a third man he addressed the same inquiry and the man answered, "I am helping Sir Christopher Wren build a beautiful cathedral." That man had vision. He could see beyond the cutting of the stone, beyond the earning of his daily wage, to the creation of a work of art—the building of a great cathedral. And in your life it is important for you to strive to attain a vision of the larger whole.”   Louise Bush-Brown http://www.bartleby.com/73/458.html

St. Paul's Cathedral

I like this story as well.  One by one it touches on all of beqom tenets of employee happiness – what’s your part, how will you be compensated, and what is the corporate vision.  Two of the men only understand one of the three tenets but the 3^rd workman that gets the whole picture.    Both the JFK and the Janitor story and the story of Sir Christopher Wren are illustrative of our ideas around employee happiness and personally both stories brought a smile to my face.  A quick injection of happiness! I hope you enjoy them as well.   

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 To learn more about beqom, please visit www.beqom.com

Global Sales Compensation Plan Design Considerations

In the course of business I get asked a lot of questions about sales compensation and the following I thought was interesting enough to share.  Feedback and questions always appreciated.

Question:  How to motivate people in different countries? We are really interested in getting some ideas about ICM examples and best practices.

Response: I will start off by saying that the sales plan is just one component of sales effectiveness and while a powerful motivation tool, the plan itself may or may not be the root problem to address.   I would start off with an analysis of the sales and go-to-market strategy, the competitive landscape, sales force design, sales operations capabilities and corporate culture before I would look straight to the sales compensation plan for fixes.   A holistic understanding of the organizational strategy and structure allows for a greater understanding of what can and needs to be addressed in the sales compensation plan and what the potential expected and unexpected consequences of any change might be.   That being said, here are some general guidelines for consideration when about designing a sales incentive compensation plan for a multi-national company.

Laws & Regulations:   You have to take into consideration local laws and industry regulations For example if you would like to have a clawback component to your sales compensation plan the enforcement of a pay-deduction for monies owed to the company due to a clawback in counties such as Denmark, France, Japan, Korea, Sweden, Latin America or the state of California will range from difficult to impossible under local laws.  Another example from the state of California prohibits any retroactive changes to a sales compensation plan, organizations cannot rewriting the terms of the commission agreement once the sale or performance has occurred.   From a regulatory perspective certain industries such as pharmaceutical, insurance, and financial services have rules that will designate what you can and cannot do in a sales incentive compensation plan.   These industry regulations can vary by country or by region.   The penalties for not following regulations can results in extremely large fines.   Some great examples of this from the Pharmaceutical Industry can be found here; http://projects.propublica.org/graphics/bigpharma

Cultural Differences:  Different countries can have vastly different cultures and the main impact to sales compensation plan design is how much pay to put at risk.   An example compensation plan may by 70/30 where 70 of the total target compensation (TTC) is base pay and 30% of TTC is at risk and dependent on performance.   In a well-designed plan he greater the % of pay at risk, the great the potential upside for the sales representative to earn.    The guiding principle of how much pay to put at risk for a particular sales role is how much control does the sales representative have over the deal.   High control = higher at risk pay, Low control = lower at risk pay.   But, cultural differences towards risk and reward must be taken into consideration as well.   For example, the mix for a sales role in America would be different for the same sales role in Japan.   A very nice article around the topic of cultural differences can be found here; http://www.worldatwork.org/waw/adimLink?id=26136 The article describes four dimensions of culture, Power Distance, Collectivism/Individualism, Uncertainty Avoidance and Femininity/Masculinity.  Each of these four cultural dynamics has a relationship to risk / reward and helps to determine the amount of pay at risk.

Market Pay:  Different markets will obviously have different total target compensation based on cost of living and the competitive market for talent.   When thinking about the sales structure and roles also consider the pay philosophy needed to recruit, motivate and retain the level of talent that you need.  A good summation of things to consider around market pay is summarized by Jeff Haden in his article, The 7 undeniable truths of employee pay, “Employees are smart. They understand market conditions, financial constraints, revenue shortfalls, and increased competition. They understand when you can’t pay top-of-market salaries. What they don’t understand is when they don’t feel fairly compensated compared to other employees in similar positions, both inside and outside your company.”   Do the research to see what the competitive landscape is for like jobs in different markets that you want to compete and set your pay levels accordingly. 

Motivation 2.0 v. 3.0:  Motivation is tricky and only so much can be accomplished by a sales compensation plan.   Not a lot of research has been done directed culture differences and sales motivation but there has been a lot of research done around motivation in general that may be applicable to sales compensation.  In Daniel Pink’s book Drive he outlines the concepts of Motivation 2.0 and Motivation 3.0.  Motivation 2.0, is what business management has used to drive operations in the modern era.   The basic principle of Motivation 2.0 is that we as humans will seek reward and avoid punishment. The classic sales compensation analogy of carrots and sticks.  Motivation 2.0 is found in compensation plans as If-then rewards, “If you do this (sell product), then you'll get that (commissions and bonuses)."  Motivation 3.0 theory is where Daniel Pink states that people would prefer activities where they can pursue three things:

•  Autonomy: People want to have control over their work and activities
• Mastery: People want to get better (be the best) at what they do
• Purpose: People desire  to be part of something that is bigger than they are    

My short term advice is to keep the sales compensation plan focused on the Motivation 2.0 aspects, pay for performance and create an environment where the Motivation 3.0 dynamics can come into play.  Pay for performance and manage behaviors.   A flowchart from the book that describes what types of job roles are more applicable to each theory can be found here; http://ow.ly/EdGN9  A TED talk by the author Daniel Pink can be found here; http://www.ted.com/talks/dan_pink_on_motivation?language=en  

Keep it simple:  This is a rule that applies to any country that a business may operate in, each sales compensation plan must be simple enough to understand with a small number of measures that link to sales strategy.    For a plan to be effective there must be a linkage between overall sales strategy and the compensation plan measures.   An easy example is revenue, if the company is in an early growth stage and any dollar of revenue is good revenue then you would expect a compensation plan to have a corresponding revenue metric.   As the business matures and grows more complex you would expect additional metrics to get added to the plan such as profit margin.   The conventional wisdom is no more than 3 measure per plan.  If you have more than three measures in a single plan you probably have the need to create an additional sales role to focus on the new measures.   The downside to having too many measures in a single plan is the inability to drive behavior.   You cannot sufficiently fund all the measures to give them the attention that they need.