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[Music] awesome [Music] welcome to another How to Succeed podcast the show that helps you get to the top and stay there this is how to succeed at creating a sales comp plan the following podcast is copyrighted by stainless systems zinc and protected by U.S copyright laws Sandler is the worldwide leader in Sales Management and customer service training you can subscribe to this podcast on iTunes Google podcasts or Spotify or check out any of the additional resources at sandler.com I'm your host Mike Montague director of community engagement with saintler you can reach out to me on LinkedIn and we are talking with Hamish Knox a long time Sandler trainer from Calgary about how to succeed at creating a sales compensation plane foreign welcome back to the podcast tell me a little bit about sales comp plans and what we're talking about today thanks for having me back Mike love visiting with you on the How to Succeed podcast so with sales comp plans you know there are no perfect comp plans so let's get that out of the way right now there is no magic comp plan that you know will magically make everything uh happen for you there's only effective comp plans and ineffective comp plans uh and really the the effective comp plans uh I use the acronym cap so you know we talked about uncapped compensation so so let's cap the comp plan by number one does it create clarity does it create Clarity with what you need to do to get paid uh is it hold our sales people accountable to doing the right activities and does it promote the correct proactive activities now by the way that could be sales that could be marketing I'm a big believer in variable call for all roles in the organization and then the on the other side uh the comp plans will get stuck in the mud so the ineffective ones get misperceived they get misperceived uh they are uh misunderstood uh and they create dysfunction so that's what an ineffective comp plan so we cap the good ones the bad ones the ineffective ones are stuck in the mud so we're gonna give some more of the audience today some insights into how do we create an effective Compensation Plan for their people yeah I think you hit on a couple of the things that make it challenging for me right off the start there so as we talk about the attitudes I think you hit a couple of them we want to enforce the right Behavior a lot of times people like things like competition where I found it just breeds more infighting and uh resentment than it does teamwork and and revenue sometimes um I've also seen where um compensation plans can get out of control and you you end up making more money for the salesperson than you do for the company or uh worse you're not paying the sales people and they get demotivated and good sales people lead so it's very much to me like this um I don't know if it's a moving Target but at least a gray area where there seems to be some kind of of Sweet Spot can you tell us more about what your attitude is towards finding the The Sweet Spot of compensation so my attitude is uh does it Advance my business right so it's a question that it has as a as an owner as a leader I see does it Advance my business so you gave a couple great examples you know the story I like to tell when we're working with the leaders uh client of ours down in the Midwest United States uh they one year comped on Revenue and so one of their sales reps sold five million dollars of stuff at cost didn't work out very well changed that very rapidly right before I joined Sandler uh the one of the companies I worked with the executive every year would set what they called their strategic products for the year which was code for things we wanted you to push on your our client base whether they want them or not well what they didn't control for was whether or not that product was already being sold into an account so one of my colleagues one of my colleagues got a very very nice basement renovation because basically his entire account base was already taking one of these strategic products and he made a ton of commission for doing nothing and again very quickly the executive realized the following year hey maybe we should put some controls in place so to your point we didn't we don't uh unintentionally damage our profit because we're overpaying our sales people now let me ask you a follow-up to this speak on the flip side of the sales person because I found that um I think especially larger organizations like to be fair and they like to have the same comp plan for everybody but like you said somebody might be in a completely different territory or a different role or just be motivated by different things so they want security over a big bonus or a you know a risky comp plan that that's commission based so how do you recommend finding the balance between being fair to everyone and letting people maybe choose the path that is is most comfortable for them well uh you know as I understand the the whole thesis of the of the Game of Thrones is life isn't fair and so we're I'm more interested in looking for comp plans that drive the behaviors that are going to get us to where we want to go but at the same time I want to understand each of my sales people's personal goals that's a big uh talk track in Sandler we talk about it at Summit we talk about it with all of our clients especially in our leadership groups around our people work harder for their goals than for our goals and so if we can understand each individual is on our team's personal goals and then tie achieving corporate goals to realizing their personal goals our friend Mike Mike Crandall out of Oklahoma City talked about that at Summit about when we create a self-accountable sales team it's really because we're supporting our people and getting to their personal goals so to me comp plans are slightly independent obviously if you've got the Money Motivated salesperson they're going to try to Max their comp plan but if you've got someone who's more security oriented or they're looking to spend more time with their family or whatever that might be that is actually an independent conversation from the comp plan and and is and is necessary because that's what's ultimately going to create the motivation that we desire and get them to actually drive our our company forward yeah that's a really important note because I think some sales managers and owners think that money is the reason people do things but it's sort of like we talk about in pain money is the surface level thing that allows you to solve deeper and and more emotional uh problems or or benefits so I think it's important to explore what those are even if the pay is the same for both people they could be using that pay for completely different uh reasons so that's important now as we move to behavior here I wanted to ask you specifically about your book and and what you mentioned with the accountability ladder and maybe moving you know compensation or benefits up or down based on their behavior and their results yeah thanks for asking uh and yeah in my book on accountability talking about a consequence ladder because when we talk about consequences usually our brains jump to you're fired well that's dumb because we hired that person for a reason we're all human beings we're gonna make mistakes we're gonna step offside we're gonna have life happen to us and we're not going to hit our number for the week or the month or the quarter even and so we we need to have a ladder and and this is really built into a lot of organizations but not necessarily formalized right and I'm a very very big believer in processes because the pressures then on the process not the person so we're going to start at you know verbal warning written warning opportunities for our sales person repair but at some point yeah there's there's going to be some calm changes and maybe it's a reduction in commissions maybe it's uh and I've heard things about like the person has to uh pay for their cell phone bill for the month or whatever it might be now I'm not an HR lawyer or an employment lawyer so there are obviously a lot of legalities and a lot of nuances in here so I'm not recommending that you do any of those things please consult with your advisors uh who have that Insight but it's gotta hurt at some point now to our conversation just a second ago about different goals well maybe the person who wants to leave early on Friday maybe they don't get to do that if they're like level four of the consequence ladder the other side of the consequent slider is you have to be able to get off of it right we can't be on double secret probation forever because that's that's just anxiety causing and instead of thinking about how can I go out and do the proactive activities I need to do hit my targets etc etc our salesperson is just gonna be thinking but I'm at level four of the latter I'm at level four of the ladder and level five is I'm fired well they're just going to polish up their LinkedIn profile and leave on their own and now we've lost somebody and I heard recently it's now taking an average of 6.2 months to find somebody now that's a body that's not necessarily a rock star that's a body to fill a role so and there's a huge opportunity cost that comes in that intervening uh window where where that per where that territory is not being filled so consequence ladder is important uh make sure that you've got the advisors guiding you with what you can do but at some point we're going to make some confidence we're going to pull some compensation levers to let our salesperson know that they they're really offside in terms of their performance and one of the big insights that took away from the book is that's also a positive consequence ladder so we can use the same thing to incentivize and I think if you do it that way two good things happen one the person basically fires themselves they if they're underperforming they're getting underpaid and then if essentially they're going to say this isn't worth it for me anymore and they're going to leave because they can't do the job same thing though if they are performing they start getting bigger bonuses and you're over only overpaying the people who deserve to be overpaid and who have earned uh that higher compensation so they're giving themselves a raise as well absolutely and something you just mentioned there Mike about you know we talk about this idea of overpaying sales people and things like that and and if we Circle back really quickly to mindset uh one of my first sales jobs ever was actually selling uh sponsorships for amateur sport organizations in British Columbia a lot of to a lot of box lacrosse teams and I'd have this conversation with an owner every now and then and they would say well why am I giving you 10 cents of every dollar that you bring in I say because you have 90 cents that you wouldn't have had without me so I had this conversation with with some leaders especially you know they come out of a technical background and you know they think sales is evil to begin with but it's a necessary evil and and that's usually when we get into that hole we need to cap our competition plans and things like that or the owner has a mindset of no one can make more than me which is nonsense uh so when we look at you know this idea of overpaying we're saying that semi-facetiously right we're excited to overpay I will stroke commission checks all day long because I get some of that as well that I wouldn't have had if unless I had that sales person on my team yeah I think it's not a great analogy here but I always think about like taxes that people complain about big tax bill they don't tax people who don't make any money I would love to pay a million dollars in taxes in the US at some point in my career yeah I would be very happy to write that check yeah because hopefully that means I may made well over a million dollars myself absolutely right so I think that's the same thing with commissions now as we get back to behavior and maybe this takes us into technique how do we design these things in a way that we are uh making money we are incentivizing the right things and what are some of these levers that we could use great question so what are the things if we look at those ineffective plans and I use the acronym mud earlier and the D is dysfunction so something that I've I've witnessed is compensating marketing love marketing by the way very important but compensating marketing on quantity of leads versus quality of leads so we want to again go back to that question does it Advance my business if I'm going to compensate operations customer service sales marketing whoever I need to be pulling a lever that's actually going to result in Revenue generation so if I'm going to say compensate my delivery drivers on the number of in of qualified introductions they bring back well they're gonna love that because they're just talking to the people they already know this is not a sales job right delivery drivers are not in sales they don't want to be in sales but I could incentivize them to go out and get more introductions for me because they're the front line they're interacting with our clients on a day-to-day basis but it can't be the number of introductions it's got to be here's a definition of what a quality introduction looks like I give a bit of training on how to effectively ask that without sounding or feeling you know slimy sleazy but that's what I want to do is is create incentives or create variable comp that actually drives qualified leads into the top of my funnel and pulls them down and creates Revenue opportunities either net new or expansion and I know we're kind of going through an inflation and and higher wages right now also a tight labor market as a result of the pandemic and and everything else going on and at least for North America where you and I are are you seeing any specific uh benefits changes like requests um as a result of that changing Market absolutely and that's actually something that that uh is great to talk about is what again going back to we think compensation just means money right you know we think more money is better we also think competition just means money I've got a very good friend of mine uh it was actually my very first client everings Handler his number one form of compensation when when he changed to a new organization or whatever ever was the flexibility in his calendar because his wife is in health care and when their children were really young you know she's on shift he's going to be doing school drop-off School pickup they got to be home whatever that might be and so any role where it was you know you're at your desk from nine to five and we're expecting this and this he's like hey that great organization but just not going to work out for me so it a lot of the conversations that are I'm hearing about and also that I'm I'm seeing is what does compensation look like to you and building something that maybe a little bit of a lower base or a little bit of a lower uh commission structure or or uh or spiffs or whatever that might be in exchange for you can work remotely uh two out of every four weeks or you can you know take uh the afternoon off uh three days a week for child care or for self-care or whatever that might be so this goes back to our conversation around understanding personal goals if we just say you know Mike here's our comp plan take it or leave it I might lose out on a really awesome candidate because I didn't take five minutes to say Mike what does compensation mean to you what are you really looking for uh and also total compensation is a big thing that we talk about with our leaders so the cell phone the laptop the health benefits the whatever goes into total compensation that's what we coach our leaders to present on the offer letter so the base salary might be X but your total comp even if you make zero commission is actually why and so you're actually getting a bigger number than you think that's going to show up on your W-2 or your T4 in Canada yeah I I love that I think that's huge and a lot of people especially you know employees don't take all of that into consideration but I've also found that that's one that can get a little sticky that it the more complicated you make a comp plan yeah the harder it is for the employee to understand and then they feel like they're getting taken advantage of because they're working hard and they're not earning it or uh somebody else is earning something uh differently because they they work differently yeah so um help me out with maybe describing what an ideal comp plan looks like how many levers are we putting in here and um what makes it sort of easy to to understand or what makes a good comp plan in that regard it's a great question it goes back to the C in cap which is clarity so you know the the the the cliche of like can a 10 year old understand it well I don't necessarily know why I want 10 year olds reading my conversation plans um but literally and my eldest daughter just turned 10 could I give her the competition plan and say tell me how you would make money if she can tell me how she could make money she doesn't need to understand the the arithmetic or any of that but she could say well if I do this and I do this and I do this I make more money than just whatever is my base salary that's a pretty good metric so the what I found for Effective compensation plans is I know exactly what I'm supposed to do what activities I need to do how often with who is a client's prospects whatever in order to earn commission uh I like to keep the commission very simple I'm not a huge fan of well you get five percent for this but you get a three percent kicker if you do this or if you get 10 if you sell this product to this type of company now there's no now there's no Clarity so here's your here's your commission and yes if we we want to put some kickers in once you get to 100 a Target 200 well that makes sense because that's super easy if I sell 100 every dollar after 100 I get two five percent extra on my commission plan or whatever so Clarity is the number one the other thing is a really strong upfront contract with each of our sales people and part of that is comp plans are between us not between everybody else now I've been in sales since I was 19. uh I have certainly lied to my sales manager I have certainly tried to break every single Compensation Plan that's the first thing I did when I got a new comp plan is like okay how do I maximize this for minimum effort and and also I would you know occasionally talk to my colleagues about you know what do you get for this what do you get for that but establishing in a private environment this is between you and me you're a different human being than uh Diane is then Sarah is then Sean is so they may I'm telling you they may have slightly different comp plan but it's because I'm supporting them and getting to their personal goals just like I'm supporting you and getting to your personal goals are you okay with that and and and really controlling that and then the other side of it is controlling the unintended consequences of a comp plan so at the example I used earlier of you know does the comp plan basically incentivize expansion or farming activities when I really want my people out hunting and adding net new because if that's the case that's my fault as a leader not my sales people's fault because sales people are creatures of the comp plans if the comp plan says go farm they're going to go farm even though I'm standing up in every sales meeting saying go hunt yeah I think you hit on on several good things there one I I liked was uh using those spiffs I think they're good for short-term things if you have a product launch or a quick Sprint you want people to do or um you know you're going to do a hunting like a prospecting uh day like hey we'll give away a trip here if somebody sets 100 appointments in the in the next you know month or whatever those things are short-term long term they don't work very well they muddy the water one person wins all the time or other things like that they just start ruining and demotivating people so I would say definitely get creative with those and keep those uh for special occasions and tourism friends the other thing you said and and I might disagree and or push back a little bit I I think you said it there is you want to be transparent when there are differences and make sure that you say up front that there are because people will talk and I think legally they're allowed to talk at least in the United States yeah uh so you want to make sure it's clear or some sometimes I like even giving them the options and saying hey look we have three complaints here you can take High base and low commissions you can take low base and high commissions or you can take this flexible uh work plan these are your three options let's talk about which one would be right for you and know that everybody's on something different so if they're choosing you know security for their their family or they're choosing Flex time over the high commissions you make make different stuff are you okay with that absolutely and here's the options they're all transparent and then you choose the one that's right for you and making it clear when they can change so if at the end of the year you made more you know sales than you thought you were and commission would have been better I can change that to you next year sure but we can't retroactively change that you're making a decision now things like that I think really add a lot of clarity to a sales compensation plan they do and one other thing that that I would be very remiss if I did not mention on a podcast or on compensation because this actually came out very recently with one of the leaders we work with around team plan events right team pools because that's a thing as well right so you have your individual plan you have your team plan et cetera Etc and doesn't matter individual plan team plan but especially for team plans everybody has to hit their cookbook right so for for listeners you've probably heard cookbook Sandler's word for a proactive activity plan whether you're leadership management sales customer service doesn't matter a cookbook is your proactive activity plan and where what this does is controls for the Free Rider effect because in every sales team and in every group of human beings there will be a free rider there'll be someone who's not doing so well but they're like oh listen I'm still going to get this from the team pool the fact is no you don't if you don't hit your proactive activity numbers because we believe if the activities happen the results will come so if you don't hit your activity numbers you don't get into that team pool and so that just means the rest of the team gets maybe a bigger piece of the pie or that your share gets pulled back and uh or saved for the next round or whatever that that might be but whether you're on an individual comp plan team plan or blend you must each rep must hit their cookbook for the the month or the quarter in order to enjoy that team Compensation Plan I think that's a great point for sure now uh we're talking with Hamish knocks a long time Sandler trainer from Calgary in Canada also the author of a couple of books change management the Sandler way and accountability the Sandler way if you want to learn more about those go to shop.sailer.com or get them on Amazon as well and Hamish that also means that you've been on the podcast so many times that I've run out of interesting bio questions so I'm just going to make up a couple of things to get to know you a little bit better um I think you know we're doing a Rebrand here this year of Sandler and we're talking about the next evolution of sales and the next evolution of Sandler I'm wondering what it is for you what's the next goal or the next you know growth project that you're working on personally well personally is actually to uh I I got in stand-up paddleboarding um and uh set up paddleboarding and cross-country skiing oddly enough during the pandemic when we could really only be outside when there was no one else around and I'm I live very close to the Rocky Mountains um and so with cross-country skiing uh I actually went out uh earlier this year and I actually took a wrong turn and instead of doing 12 kilometers I did 19 and a half um in just under three hours and was very grateful that it's a recreational activity instead of a mode of Transport but um my goal this summer for my stand-up paddle boarding is there's a place uh out near Banff called Lake Minnewanka and my goal is to stand up paddle board the breadth uh or the length of Lake Minnewanka which is theoretically an eight hour stand-up paddle board so I'm just starting my training for that and uh you can imagine up here um we're not just grabbing board shorts and going there's there's a lot of neoprene involved what I quote stand up paddle boarding in the Rocky Mountains that's funny I did the same thing with a bicycle I bought here during the pandemic cool uh made them made a mistake on my first journey out and ended up doing a couple of Miles extra that I thought and paid the price for that the next couple of weeks um what about professionally so I have a question and ask myself every day which is who did I support today and that could mean I had a conversation with a barista at a coffee shop and made them feel like a human being um or it could mean that I uh supported one of my team uh and as we're recording when my team is going through a very challenging time so we're all supporting them uh or it could be supported a client or whatever so uh professionally I have a goal to become an angel investor I'm working on my accredited investor status and also to get my Institute of corporate directory certification the icdd to sit on boards because if I'm sitting on the board of a fifty five hundred thousand person company I'm literally supporting all of the people but at obviously at the board level so investing Angel Investing uh sitting on corporate boards and uh and growing out my team here at uh at Sandler Calgary uh to so we can support more organizations and individuals uh in our territory to you know have the consistent repeatable uh success that is the core of Sandler and last one I ask you this uh every time so you can pick a the same one or a new one but based on sales compensation plans do you have a favorite quote motto or Mantra there are no perfect compensation planned there are only effective or ineffective so we're always working on making our comp plans more effective because as soon as they go out in the real world someone's going to try to break them in some way which is what I want them to do because I want it to be more effective so that's my quote I love it now let's wrap it up for everybody and do the official attitude behavior and technique So based on sales comp plans what is one attitude you'd like people to have be very comfortable with quote unquote overpaying your sales people because you're probably making more money than you ever would if you weren't and one key Behavior or action item you'd like people to do create Clarity in your Compensation Plan could a 10 year old tell you how they could make money even if they don't understand the arithmetic you probably got a a comp plan that's got a lot of clarity to it and best technique tool or hack to use strong upfront contract especially around you must hit your cookbook in order to activate all of the levers in your competition plan I like it once again and that's Hamish knock sailor trainer from Calgary Canada and for more information on Sandler you can go to sandler.com there's a bunch of free resources there you can reach out to a local trainer or our Enterprise team wherever you think you can get the most help as always you can subscribe to this podcast leave us a review uh add me on LinkedIn I'm Mike Montague director of community engagement at sailor and thank you for listening remember whatever you are be a good one the How To Succeed podcast is brought to you by Sandler the worldwide leader in Sales Management and customer service training with over 200 locations for more information visit sandler.com [Music] the Sandler Summit returns in 2023 each new event builds exponentially upon the energy and success of the prior year the 2022 Sandler Summit event was a huge success for everyone who attended so don't miss the next one buy your tickets to the Sandler Summit at sandler.com Summit [Music]