Incentives matter. But getting them right is a daunting task, if business leaders want to motivate the right actions, avoid unwanted “gaming” behavior, and manage incentive budgets responsibly.
That’s why I enjoyed reading Chris Cabrera’s new book Game the Plan, which promotes an analytics-based approach to create and improve incentive compensation plans to “inspire peak performance.”
None of this suggests — to me at least — that sales reps or any employees should be considered “coin operated.” Studies show that managers tend to overvalue direct compensation (wages, commissions, bonuses) as a motivational tool. Employees rank having a fulfilling job and being appreciated for their work much higher. And it doesn’t cost anything to say “thanks for job well done,” does it?
Here are five questions I asked Chris via an email interview.
1. Why did you write this book?
When I started Xactly almost a decade ago, it was because I believed in the concept of a win-win. For way too long, we’d lived in a business world where the Fortune 100 had access to technology that small and medium businesses couldn’t even dream of. But with the rise of SaaS technology, the pendulum was shifting. I saw the opportunity in this for incentive compensation in particular; as finally, this critical technology could become a reality for any business when delivered via the cloud. I wanted to create a win-win culture where employees were inspired and motivated by what they do, and in turn, deliver a great experience and technology to our customers. With this vision as the foundation, I started Xactly in 2008.
That same idea of a win-win is at the heart of Game the Plan. The book is really a culmination of things I learned and stories I have collected throughout the Xactly journey. The biggest piece is this underlying idea that employees and people can’t work in harmony when it comes to incentives. For too long, professionals and organizations have fought each other for a bigger slice of the “incentive pie.” That kind of relationship breeds mistrust, and it’s exhausting. It’s also pointless: With the tools and insight we have today, you SHOULD be encouraging your sales people — and every other member of your workforce — to game their plans.
2. How important are incentives in motivating salespeople? Does the quality of the job, culture, etc. matter to employee engagement, or it just “show me the money!”
Like anyone else, salespeople respond to what’s in it for them. According to a 2013 Gallup Workplace poll, disengaged employees cost the US $550B every single year because of missed workdays, loss of productivity, poor work quality, and more. I believe that’s because we, as corporate leaders, have overlooked the most critical component of incentive compensation to date. We need to know what inspires, what motivates, each member of our workforce. And the numbers show, it isn’t just money.
Today, more than ever, the quality of a job matters. In particular, recognition and meaning matter the most to today’s multigenerational workforce, which is increasingly made up of millennials. They want to feel like their work makes a difference. When a person is inspired, they bring inspiration into their job, and inspire others around them. Collectively, inspired teams create amazing results. That’s what incentives are all about.
3. In your book you discuss “the dirty dozen” of sales compensation plan mistakes. What’s one that you’ve found is most problematic for management?
Each one is important, frankly. But if I had to pick one, I’d pick not being able to give accurate and timely feedback. As humans, we don’t like delayed gratification, yet companies often pay several months in arrears. This is not to even mention giving actionable feedback regularly that will help enhance performance.
If you let too much time pass between an action your employee takes and the reward you give, you miss a valuable opportunity to motivate him to do more of the same.
4. How can sales management figure out upfront how a compensation plan is likely to be gamed so that they don’t have to learn from (bad) experience and rush to fix plans after they are launched?
Designing and implementing a compensation plan always involves some discoveries along the way. You can do the best you can to strategize well by rewarding what your team has the greatest ability to influence. Our terabytes of data show it’s best to limit your plans to about three success metrics. Having buy-in and support in your executive team, and of course, clear communication of the plan to their teams, is imperative.
But more than anything, the platform that you use to roll out your plan is critical. You’ll need to make tweaks along the way, and you have to be able to do that on the fly. What’s more, your team needs consistent, accurate feedback to keep them invested. Our data shows that the most-used part of our entire platform is the “Show Me The Money” button, which shows people their progress to their plans any time they want.
5. In chapter 8 you discuss how to “unleash motivated behavior” with a compensation strategy. Can you give a brief example of a company that realized a boost in performance using the practices you advocate in your book?
We just finished an engagement with a Fortune 100 company that’s well known in the Silicon Valley. With our data, that company pinpointed some significant problems in its current incentive compensation model. The changes their team put into place saved them seven figures. Compensation is one of a company’s biggest line items, with inaccuracies costing thousands to hundreds of thousands of dollars. Truly understanding how that money is being spent and how to mitigate risk and errors is key. But even more importantly, understanding how to tweak the levers can inspire a whole new level of engagement and productivity from your workforce, increasing both retention and the bottom line.
Christopher W. Cabrera, founder, president and CEO of Xactly Corporation, is a seasoned executive with more than two decades of successful senior management experience at both early-stage and public companies. Mr. Cabrera is a noted industry expert in issues relating to sales performance management, sales compensation, and enterprise and on-demand/software-as-a-service delivery models. Cabrera is the author of Game The Plan (River Grove Books, 2014) and co-author of Xactly Sales Compensation for Dummies (Wiley Publishing, 2006).
