Components, Compensation, & Cobra Effects
What will you breed? Cobras, complacency, or a commitment to sales excellence?
Venomous cobras roaming the streets tend to get people’s attention. It was the mid-1800s. India was an English colony, so the British brain trust convened a meeting to identify a solution.
A commonsense solution soon emerged. A bounty was placed on the head of every dead cobra.
The depth of thinking could be distilled down to:
- Venomous cobras on the loose are bad.
- A financial reward to incentivize the locals to kill the cobras is good.
- The cobra problem would be solved while improving community relations.
“That’s a bloody win-win solution!” the colonialists surely exclaimed in unison over tea and crumpets that afternoon.
What could possibly go wrong?
Once the bounty program for dead cobras was announced, everyone behaved as the British had hoped. Immediately, dead cobra heads were delivered by the bushel.
Financial rewards were distributed. The cobra population fell precipitously. Everything was going according
to plan.
Until it didn’t.
The entrepreneurs quickly realized this financial bonanza would be over as soon as the cobras were eradicated. So, they sought to extend it. How?
They began breeding cobras, obviously.
The British were perplexed as heads continued to be delivered for payment, but the cobra problem stopped decreasing over time. Of course, thanks to an ingenious counter-solution, the cobra problem would never go away. The locals hoped the cobra program represented fixed sums of money paid out weekly and ideally for the rest of their lives.
In time, the British government learned of this “entrepreneurialism.” They were displeased. Failing to anticipate unintended consequences yet again, the government hastily canceled the program.
The Delhi locals reacted in kind. The breeders released all the cobras into the street, tripling the pre-bounty cobra numbers.
This offers us all a lesson: every incentive carries the risk of unintended consequences. In hindsight, poor people breeding cobras to cut their heads off and earn an a fee is the most logical outcome.
Human nature dictates that when financial incentives are introduced, people will seek to maximize their gain through the least effort possible.
How can you avoid such Cobra Effects? You can avoid unintended consequences in sales through the disciplined focus on sales activities, output, and incentives.
Sales Activities
Sales activities are those that directly underpin the sales process. (Relevant question: Do you have a sales process? One that is documented on a single piece of paper and easily understood, predictable, and repeatable?)
Let’s use a generic five-step sales process:
- Research an opportunity;
- Open a dialogue;
- Propose ideas and insights to deliver unique value;
- Negotiate; and,
- Close.
Any activities that do not directly move new opportunities forward along this five-step process — with existing customers or targeted prospects — are non-sales activities.
Doing takeoffs, inputting orders into the system, measuring foundations, confirming delivery dates, monitoring job site deliveries, attending meetings for the Party Planning Committee, and following up on invoices are all examples of non-sales activities.
Are they important? Sure.
Should sales be doing them? Not if you want your salespeople selling.
It may seem like common sense to have salespeople spend most of their time conducting sales activities, but it’s hardly common practice. In working with thousands of sales professionals over the past decade, we consistently find most salespeople spend less than 30 percent of their time on activities that directly drive sales results.
How can you avoid such a fate?
First, recognize that sales, account management, and customer service are three distinct roles, each with their own purpose. With that in mind, identify the specific sales activities that underpin your sales process. Then relentlessly prune all extracurricular activities (especially the Party Planning Committee.)
Sales Output
Next, assign the percentage of time spent in each activity during the week. This step is critical to intentionally engineer the output of your sales team.
Want your salespeople to develop plans to steal your top competitor’s best customers away? Great. What percentage of their time each week should be spent doing this?
Want your salespeople to intentionally sell more of what you offer to your current customers? Wonderful. What percentage of their time each week should be spent doing this?
Want your salespeople to meet with builders who are still stick-framing to understand their needs, fears, and pains? Fantastic. What percentage of their time each week should be spent doing this?
You cannot expect predictable output without clarity around the time spent in each activity. This requires clearly stated goals and constant tradeoffs among the urgent and unexpected occurrences of daily life.
A simple Activity-Output template can eliminate confusion in under one hour. You can download and share this template by visiting behindyourbacksales.com/tools.
Incentives
Incentives should be carefully selected to promote the behaviors you wish to see more of — and decrease the behaviors you wish to see less of. Sounds simple enough, yet we know all about Cobra Effects.
The most common unintended consequence in sales is Acute Annuity-based Account Management Syndrome (3A-MS™). Suppose a growth-oriented company implements an incentive program whereby sales reps earn a commission on gross profit dollars generated.
When the company profits, the sales rep profits. So far, so good.
Over time, the sales rep lands a few large accounts. The rep works hard to deliver unique value and customize solutions that make the account’s life easier. The rep smooths over the inevitable bumps in the road during the first 12-18 months as the two organizations settle into a predictable rhythm.
As the relationship enters year three, the first signs of 3A-MS appear. Time invested in creatively getting components to and through the customer more efficiently is replaced with the WTF Model (Whiskey, Tickets, and Fishing) of account management and relationship building. No new products and services are sold. The sales rep shifts from relentlessly delivering unique value to a “maintain and retain” mindset, as the commission checks roll in each month with little to no stress.
As the company pushes for further growth, the sales rep pushes back. After all, s/he worked hard to earn those accounts years ago, driving profits for everyone at the firm. These high-value accounts — now on autopilot — represent earned annuities.
Want your salespeople to develop plans to steal your top competitor’s best customers away?
“I can’t. I’m too busy with what I already have.”
Want your salespeople to intentionally sell more of what you offer to your current customers?
“I asked. They’re not interested.”
Want your salespeople to meet with builders who are still stick-framing to understand their needs, fears, and pains? “I’m not interested. Those old dogs will never change.”
Do any of these unintended consequences sound eerily familiar?
Bottom Line
Not unlike 19th century India, your leadership team may be detecting a new threat: the growing number of sales reps with 3A-MS (Acute Annuity-based Account Management Syndrome) roaming the streets. Will you convene a meeting to identify a solution?
You can avoid unintended consequences in sales through the disciplined focus on sales activities, output, and incentives. It’s this trio that creates the environment necessary to breed true sales professionals.
Indeed, true sales reps — those with a passion for disciplined selling, not account management or customer service — are a rare breed. It’s your role to create the conditions for proper breeding.
So, what will you breed? Cobras, complacency, or a commitment to sales excellence?
Author: Bradley Hartmann is a recovering area purchasing manager for a national builder and CEO of The Behind Your Back Sales Co. He lives in Dallas and can be easily reached at bradley@behindyourbacksales.com