Jack

The thing is that I remain unconvinced of the need for an incentive plan of *any* kind. I believe that people are intrinsically motivated to (a) do good work and (b) participate in the success of the company. Aren’t you?

So my concern is that such plans monetize something that shouldn’t be monetized and, at best, distribute shareholders funds needlessly or, at worst, damage intrinsic motivation and dis-empower middle management.

It only makes sense to call such a plan successful if it drives a level of profitability over and above what would have existed otherwise. I have never seen any attempt to measure this.

I read Jack Stack’s ‘Problem with Profit Sharing’ article in the link you provided. He’s actually lobbying for a bonus scheme — which is exactly what I’m warning against.

That aside, Stack is no different from me in that he’s advancing a logical argument. Neither of us is presenting hard data.

The difference is that one of us is suggesting the distribution of shareholder funds. I suggest the onus rests with *that* fellow to present the hard data.

As I said, it’s a mistake to assume that the traditional contract between employer and employee is non-variable. Labor is an efficient market and your employees are — or should be — empowered to lobby management to ensure they are paid their market value.

Justin

Justin,

Great work as always.

Two questions:

-Even if not related to SPE, do you really think there are environments where commission should be paid? I know about Pink’s and Kohn’s work, and know that they cause “less harm” in non-knowledge work environments, but I tend to believe that if you use your two principles of compensation (a mix between what the person’s worth and what he’s asking for as paymnet), it should be all right without commissions.

-Will you expand in your book on the use of targets and quotas, and what to use instead? I’ve seen several takes at this, including options where you make the targets / quotas more general (once a year) and eliminate the monthly measurements.

Thanks

However, are you really an advocate for commission

I could be speaking out of place here, and feel free to correct me if I am, but I walked away from the material with this:

You replace quotas and targets with “do your job”. In an engineer-to-order environment, I don’t know how you can set quotas with any realistic expectations. My employer makes engineer-to-order systems. Our products are not a commodity. You never know when you’re going to get the next order, or necessarily how large the order will be, so planning out the number of “sales won” seems like an impossible task to me.

I’ve been in meetings where people try to do exactly that, and the folks who actually “do the work” end up staring at the conference room table, or bobbing their heads just so they can get out of the room and back to doing actual work. In that environment, how would you “establish a baseline”? You don’t.

You seek to increase opportunity flow, as opposed to increasing “conversion rate”.

Again, my appologies if I misunderstood or spoke out of turn.

Great feedback, Giri, thank you!

Bruce

The first thing to remember is that we do not promote the elimination of performance pay as a stand-alone initiative. Rather it is a critical step in a bigger initiative — the complete restructuring of the sales function.

It’s in the latter initiative that your concerns are really addressed.

That said, here are my general observations.

For the most part, when our clients ask salespeople to quote the salary they would need to earn to make the transition, most quote less than their managers expect. Many quote less than their current average earnings.

This suggests that salespeople are well-aware of the market value of a performance-pay plan.

Sure, a salary might attract poor performers — but it’s your prerogative not to hire them!

Remember, commissions make performance option. Conversely, salaries put you in the position where you can demand performance.

Justin