Legos and the Art of Fixing Sales Compensation
Many of you may be familiar with the renowned Behavioral Economist and author, Daniel Ariely. He studies and discusses how work is about much more than just pay. One of his most famous discussions covers a study he did that asked people to build Lego sets. The primary finding was people didn’t like to see work they had performed taken apart. I love Lego (perhaps because I have a young child), and I think they translate well into many pay and organization design concepts as prescribed by credible salary consultants. In this article, I cover how Legos can be help you understand why it’s so hard to fix your sales incentives.
Legos are amazing. They often come in kits that provide instructions on exactly how to build the picture on the box. My son has built most of the world’s city skylines. I can’t get him to take one apart for anything. They also come in random sets of hundreds that require only your imagination and time. After you have built something cool with a random set, the trick is that it can be as psychologically tricky to break apart as a completed designed set.
Given enough Lego and you can build just about anything. Sales compensation is similarly simple, flexible, and potentially complex. Do you focus people on volume, quality of sales, profitability, growth, long-term builds? This list is nearly endless. How you motivate people to stay focused is similarly flexible. Do you use commissions, SPIFFs, spot bonuses, long-term incentives, quarterly goals, annual goals, team metrics, or individual achievement? Do you focus on granularity or stay tuned with the big picture? Any program requires buy-in from so many people and groups. The final result is something that people depend on to pay their bills and keep their company afloat.
Changing a percentage, or one metric, or adjusting a quota or sales region are done all the time. But these kinds of changes do not keep a sales incentive plan current with a company that has evolved and grown in any significant way. Markets change, products change, consumer desires change, trends blow like the winds. The tower you built with your Lego years ago may no longer be able to support your objectives. This is your starting point.
It takes a special kind of buy-in and commitment to get people on board with tearing apart the old Lego tower and starting over with a pile of bricks. This is often the only path to success, but it takes a long time and requires you to keep an old plan running less than optimally while your best people work on something better. The task is not for the meek. It is for bold and confident professionals who want to see their company achieve its true potential.
I have found that explaining things to stakeholders in these terms can often help gain acceptance and participation from those who can make the right decisions and champion the final program. Tearing apart your beautiful Lego building and starting with something new can be painful. Still, the result is something that uses prior experience and boundless imagination to create something even better.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, , “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.
About FutureSense
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