Over the past few months, I’ve been involved in a lot of discussions on sales compensation. Last quarter, the conversations focused on commission and bonus plans people were looking to put in place for this year. Last week and this week, I’m involved in a lot of discussions about people being disappointed in the bonuses they received or didn’t receive for last year, how to manage the issues and so forth.
We talk about pay for performance all the time. Everyone likes pay for performance when there are great years. When we’ve blown out the numbers or overachieved our goals, people are excited about pay for performance. But when we have had a tough year. When business is down or we haven’t met our goals—despite how hard we worked and how much we tried—we don’t like pay for performance. I can’t count the discussions I’ve had about, “my people think they should be paid for their hard work and effort.”
I have to admit I’m a little hard nosed about this topic. We can’t have it both ways, it’s just an insane argument. When we perform well we should be compensated for it. When we perform poorly, we should be compensated for that performance—not our effort. If our performance has been down from the previous year, our compensation should be less than the previous year. We’ve produced fewer results.
I suppose it’s human nature to focus on ourselves and our compensation. It’s natural to always want to see progression and increases. But failing to produce results impacts more than our compensation. It ripples through the entire company, it impacts shareholder perception, suppliers and others.
If the sales organization as a whole doesn’t produce results, people lose jobs. Even though we have worked very hard, even though we have put in long hours, we haven’t produced the results. We can’t pay the bills in the organization, we can fund new projects and programs through good intentions and hard work.
Accountability is tough. There are upsides and downsides. We can’t choose to be happy with the upside only and not have to bear the consequences of the downside. Accountability is blind to that.
I’m tough on this. People say, they should be better compensated. My answer is very simple, you can be better compensated. It is totally in your control. Meet or overachieve your goals. Your compensation will increase when that happens.
Perhaps my view was shaped many years ago when I was having a similar discussion about my compensation with my manager at the time. I thought I deserved an increase because of my dedication and efforts. His response was succinct and clear: “Your increase will become effective when you become effective.”
Are you being effective? Are you achieving your goals and producing results? If you aren’t you have no basis for any discussion on your compensation. Sales is a job in which we are compensated for our performance, so it’s our responsibility to perform.