Talent Management, Variable Compensation and Sales Productivity

As companies attempt to recruit, retain, and develop talent in a highly competitive market, a few important facts should be considered. The Baby Boomer’s continued exodus from the workforce, combined with a relatively robust economy in which unemployment is at a historic low since the great recession of 2008 are driving up compensation demands for employers. Exacerbating this challenge for employers is the demographic impact of Millennials who tend to change jobs (and careers) more rapidly than previous generations. So what should organizations do in light of these trends?

First, they should be creating compensation structures that reward exceptional performance, even as they should reduce the number of metrics on which those employees are measured. Simple, straightforward performance goals related to productivity, sales, efficiency, compliance, and turnover are a few to consider across a variety of roles. Additionally, businesses now eschew annual performance review in favor of performance check-ins. We recommend check-ins are brief, frequent, and ongoing interactions between management and staff during, many of which may include the use of a performance dashboard. In short, those dashboards are like vital signs such as blood pressure, respiration, heart rate which are consistently monitored when healthcare professionals are monitoring patient health. Yet unlike those healthcare monitoring needs, organizational check-ins, should be forward-looking. In such cases, past performance (say for a week, month, or quarter) discussions must include dialogue about what employees should do more of, less of, do better, or do differently in the future. Such check-ins, based on our experience and research should create a culture of both accountability and encouragement.

In their efforts to reward performance, employer’s efforts related to the oft-dreaded annual review and an average salary increase of 3% seem a poor investment of time and money. So while there remains a continued obligation for employers not to discriminate in their compensation programs, establishing measurable performance standards and tying exceptional performance to variable compensation is an important tool in the toolbox of employers. Yet it is important to note variable compensation is meant to be variable. As one company executive puts it:

“Variable rewards based on clearly defined target goals at the individual, departmental and organizational level can change employees’ mindsets from “this is what I need to do to please my boss so I can get a big raise or bonus” to “this is what I need to do to add value to the company,” Rubino said. For incentive metrics to work, “there must be a performance threshold beneath which no payments are made,” he added. “That’s why the program is called ‘variable.’ “

Second, to insure buy-in from their teams, employers should be allowing their team members to weigh-in on how their performance goals are established, allowing for flexibility with regard to the experience and expertise of their team members. Rarely does one size fit all when it comes to performance expectations. That isn’t to say minimum performance standards based on job roles should not be established. But, say in the case of a commercial bank a Relationship Manager I may have the same duties as in many was a more tenured Relationship Manager V. So the loan, deposit, and fee income production responsibilities of each class will vary. And those goals may vary, to some degree, based on the markets in which those team members serve.

To be clear, clear, the responsibility of a sales person is to grow the incremental revenue of an organization. That may mean they have some obligations to help retain clients (as in the case of bankers), but continually growing revenue and the number of clients of the organization should not plateau for any sales professional. Revenue growth is largely what matters when it comes to sales performance and variable compensation, commissions, bonuses, etc. And, in general, the more liberal the variable compensation plan is, the lower fixed salaries should be. In some cases, again, say relationship managers in banking, employees will have non-sales related responsibilities (client retention, portfolio documentation, compliance, supporting corporate values) so their sales may represent a higher portion of their relative compensation than in true sales roles.

Third, if employers want to retain top talent (especially younger talent) those team members must see a path for growth in their expertise and the potential for being rewarded. Yet such rewards need not always be financial. They can include additional responsibilities, inviting them into organizational leadership programs, providing them with a third-party coach or an internal mentor. Millennials, in particular, are concerned about how they can grow professionally and understand how their profession matters in terms of their purpose or intentions about life—and most don’t believe their talents are being adequately utilized. Smart employers identify their promotable talent and those into whom they will pour their energies in an effort to keep them on staff—especially those who are highly productive. Fortunately, such developmental strategies need not be costly. They can be as simple as engaging such team members in strategic projects, allowing them to observe and listen in to dialogue around decision-making, developing internal best-practices or case studies for the benefit of the entire organization.

Finally, we’ve founded wisdom in the adage sometimes you can do more with one big tractor than two little ones. This analogy, when it comes to talent means hiring two lower salaried employees may mean organizations accomplish less than if they hire one higher salaried team member. It’s possible pay two employees $50,000 a piece but get less return on that $100,000, than by hiring a single employee with a $75,000 salary if that individual has more expertise, motivation, leadership ability, and determination than the other two. We call that leverage. Looking for bargains in organizational hiring and talent acquisition strategies can result in a far lower ROI. Smart employers don’t always bargain-hunt.

If you’d like to know more about how Performance Strategies Group works with organizations and individuals to help build meaningful strategic plans, our executive coaching work, or how we collaborate to help them build better leadership and sales processes and skills, contact Principal Consultant, Jim Owens at jim@psghsv.com