Several months ago I posted about Daniel Pink’s Drive. His assertion is that ‘creative’ employees and roles are better linked to non-monetary incentives once a base level of remuneration is reached and achieved.

http://www.alighaemi.com/wp/?p=522

Compensating employees that are wholly, or more likely partly, commission or bonus-based is still a matter of much argument. Pink’s synopsis of years of research into the subject suggests most companies have it wrong. In fact, whole companies and systems exist to figure out how to calculate the variable portion of employees’ pays.

www.varicent.com

www.callidussoftware.com

www.silverlinesales.co.uk

Others just make do with Excel.

However, fact is, most salespeople are still placed in a stick and carrot setting.

• Most are paid a commission based on either a goal of total revenue or profit margins. These are simple and based on desirable revenues and associated profits. The net earnings may be an explicit target. The notion is that the salesperson applies maximum pressure to customers to obtain the highest price available for goods or services in order to maximize revenue and profit.
• Companies have resorted to making gross profit the top incentive for salespersons in order to ensure the salesperson does not overly discount. The downside of such an approach is that salespersons might avoid engaging in sales that earn them little money, even though their employing company might actually need the revenue and cash flow at that time.
• Other incentive planners have resorted to creating tasks and challenges for the salesperson to achieve. These, typically, are accorded to more specialized sales functions such as marketing including telemarketing or technical pre-sales. Quota may revolve around number of calls, number of leads in the funnel, number of demos or customer visits and even customer feedback and satisfaction based on surveys. Negatively, such plans might indicate to the salesperson that once the target is attained further gains are nominal or not essential.
• From a salesperson’s perspective it is critical that the goals be explicit, simple and comprehensible. Capping a compensation plan might also allow for better budgeting, but is counterproductive given the penchant for work to slow down once 100% of goal – and payout – is attained. Companies and managers should also be mindful of creating convoluted and multi-pronged compensation plans that may not be easily, or at all, understood.

Like any relationship both sides win when both sides are satisfied. Management needs to consider the perspective of the employee before creating and operationalizing a plan.

When last we looked at what motivates employees it was through an InformationWeek survey and analysis in mid-2008. Three years later and the publication has issued an updated ranking of what matters to employees.

• In 2008 the top three condistions of satisfaction were:
  Base Pay
  Benefits
  Challenging Job

2008 Salary Survey Three Years Ago

• What are the top 5 criteria that employees cite as important to them (as printed in the May 30, 2011 issue) three years later?
  Base Pay
  Job And Company Stability
  Benefits
  Flexible Work Schedule
  My Opinion And Knowledge Are Valued

Note: these are presumably IT workers

The top 3 criteria are similar with ‘stability’ having crept in possibly due to the main street recession in which some of the world has been mired.
Interestingly, and perhaps coincidentally, elsewhere in that edition of the magazine, an article titled 4 Steps To Spark Innovation notes that “in the first quarter of 2011, 20% of S&P 500 companies reported that their revenue exceeded prerecession peaks. Many more will reach this milestone before the end of 2011.”

Is senior management listening? Will the stock market care? Will Wall Street/Bay Street think longer term and note what makes companies tick (think Google’s announcement regarding salaries)?

*Things That Need to Go Away: ‘motivational’ e-mails from the CFO that share prices are up or earning are either up or steady (but employment, benefits, perks or salaries will be slashed).