Incent Right? Incent Differently

Earlier this week, this article on Yahoo Finance caught my eye. The article is titled, ‘Firms Try to Shore Up Incentive Pay’, and talks about how many companies today are faced with sagging morale among their employees, and as such, are looking for ways to keep their staff whole – especially when things like stock awards, MBOs and other variable compensation targets are not being achieved.

Obviously, this is a topic that much interests me, seeing as how I’m in the business of helping companies to incent their people in the right ways. In the past, I’ve referred to this as ‘Behavioral Science’, and it’s an area that has become increasingly germane as the economy has soured.

This Yahoo article says, “As plummeting stock prices and profits pummel companies' incentive-pay plans, many firms are considering extra measures to reward employees… nearly three-quarters had implemented or were considering such measures, including stock awards or special bonuses. Respondents said they were worried about keeping key workers and boosting morale in the turbulent economy.”

Now, intuitively, one might say that it seems less likely that companies would experience employee turnover during turbulent times, as people who have stable employment would want to make sure that things stay that way. However, top-performers are always in demand, and those are the people companies can least afford to lose, especially now. Unfortunately, those are the people who are not making their bonuses currently.

“… many surveyed companies said they were thinking of tweaking bonus plans to increase their chances of paying out, and modifying long-term incentive programs to "improve the value" for workers. Nearly a third said they were considering additional programs to keep key employees -- often special payments to supplement regular bonus pools.”

One possible answer is the use of non-cash rewards as a way to motivate behavior and improve performance. Non-cash rewards have proven effective in motivating employees to excel in all types of economies. And they have proven effective not just for the sales team, but other functions such as customer support, marketing and other specific corporate audiences.

Non-cash rewards go where cash cannot in rewarding specific behaviors and creating a positive work environment. They provide greater agility anytime there’s a special opportunity such as rewarding up sell or cross sell, moving excess inventory in the channel, resolving customer-support cases, attracting prospects to marketing events, etc. The instant gratification factor of non-cash rewards also is attractive to many employees, particularly younger employees with little patience for annual or semiannual bonuses.

Put on your behavioral scientist white lab coat and give it a try. Let’s get creative.

Turn That Frown Upside Down

Difficult though it may be, I’ve been looking for reasons to stay optimistic amidst the avalanche of negative news about the economy.

It seems like all we’ve been hearing is that our current state of affairs is horrible, and we’re teetering on the brink of wholesale disaster. Then Monday arrives and Wall Street posts its largest single-day gain in the history of the market – perhaps this bailout just might work.



As an entrepreneur, it got me thinking about other reasons to stay positive when it seems like the prevailing wisdom might call for switching to pessimism.

No way. Any company can build brand value and gobble up market share when times are good – the truly exceptional companies do that even when things are rough.

I love this quote from Jason Calacanis (founder of Weblogs, Inc. and current CEO of Mahalo.com): “Great entrepreneurs build value and market-share in down markets. They go to work seven days a week and the(y) breakout when other folks check out.”

I love that sentiment – it gives me a warm feeling – and it led to me a wonderful article (published on TechCrunch.com) that uses Calacanis’s quote. The upshot of the article is that times may be tough all over, but there are still opportunities in the technology sector, as there *always* is for companies who have a unique solution to offer.

“While the floor is crumbling for many industries much in the same way it did for Silicon Valley during the dot-bomb years, the sky isn’t necessarily falling on the startup industry – at least not for those with marketable technology or products, dedicated and capable teams, an executable business plan, and access to the resources necessary to help it reach users and customers.”

This is a vitally important concept, and one that should be shouted from the rooftops. Companies will still need to spend money – no matter how bad the economic situation gets. It’s just that they will preserve their cash and spend it carefully on products that can help them improve, streamline their processes and boost their bottom lines.

So all is NOT gloom and doom.

“For those startups that are building and marketing something of value for consumers or businesses, there is much work to do. While there is always a need to attract mainstream users, this isn’t the time to stretch or over-commit resources to hit everyone all at once. Branding is an expensive proposition, one that requires time, capital, diligence, dedicated teams, enthusiastic customers, and patience. As counter intuitive as it may seem, this is exactly the right time to market into the echo chamber to earn the support of influentials who will create significant, concentrated brand visibility and momentum to carry you forward.”

Build a strong brand, and it will return to you ten-fold, I think. And now is the right time to do it. After all, you’re still aiming for the same target you always were – your customers are out there; the dartboard may have gotten smaller lately; but the target is still there, waiting to receive the arrow that is your message, your brand, your solution.

Cloud Computing - A Silver Lining

Is it true that every cloud has a silver lining? What about cloud computing? I was reminded of the silver-lining adage recently when I noticed that several online news outlets had picked up this story from silicon.com – the thrust of which is that many companies still are not even aware of SaaS.

Sometimes we may lapse into thinking that we’re a bigger deal than we really are; and this forces us SaaS vendors to work that much harder to earn validation in the marketplace.

This article quotes statistics taken from a study conducted by BT (British Telecom), “One of the problems that we've unearthed in a survey that we did recently was about 81 per cent of customers we spoke to didn't really know about software as a service…”

This quote was from Chris Lindsay from BT, who goes on to say, "It's quite eye-opening really in terms of the lack of awareness but [also] the benefits are very clearly spelt out by the customers who have adopted the services…"

So the bad news is that 81% of companies (in the UK anyway) aren’t familiar with SaaS as a delivery model, but the good news is that, if they were familiar with it, they’d like it.

Unfortunately, several other online media outlets picked up this story and trumpeted it from the rooftops, using the somewhat sensational (and misleading) headlines such as, “Business Not Taking to SaaS”, “Businesses Still Clueless Over SaaS”, and “Businesses Still in the Dark About SaaS”.

What this tells me is that we – as an industry – still have a lot of work to do in order to get the word out on the SaaS delivery model in general. I think, too often, perhaps we forget that Silicon Valley doesn’t extend worldwide yet – in different parts of the world, the market penetration and mindshare that SaaS has claimed varies wildly depending on the geography you’re talking about.

Remember that the study in question was conducted in the UK, and there was some great news out of that region earlier this week, when TechWorld (billed as “The UK’s infrastructure and networking knowledge centre”) published this article that found a majority of companies planned “to adopt SaaS within five years.”

Neil Barton, director at Hostway, said: “Companies are certain that SaaS will make their application usage more c006Fst-effective because of the reduction in software management costs, and the ability to eliminate buying too many or too few software licenses.”

I agree with Jeff Kaplan of THINKstrategies who said, "I think (SaaS) adoption is far more advanced than is being readily reported.”

What SMBs are most concerned about is the functionality, Kaplan said. What they're finding is it's not just simpler and less expensive, it also adds a whole layer of application opportunity they couldn't get from legacy apps.

"A lot are having a revelation."

So perhaps that’s the silver lining to this particular cloud?

If not that, then perhaps the news yesterday that Symantec had agreed to buy MessageLab’s SaaS business unit for $695 million. Clearly, Symantec’s CEO John W. Thompson expects to make a major push into the SaaS market immediately. Reaction from industry media members was positive, as TheStreet.com and Forbes both published articles lauding the acquisition – one titled “Symantec Adds to Web-Software Arsenal”, and the other cleverly titled “Symantec Has Its Head in the Cloud”.

I think we’ve only seen the beginning of large companies looking to strategically make inroads into the SaaS/cloud-computing market. It makes too much sense to ignore, especially in these trying times.





_

Da Vinci, Plate Tectonics and CapEx Budgets

Here in San Jose, where Xactly is headquartered, the Tech Museum of Innovation – located right down the street from us – recently unveiled the world premiere of an exhibit titled ‘Leonardo: 500 Years into the Future’, billed as “the largest, most comprehensive exhibit of the innovative art, science and engineering works of Leonardo da Vinci” and “a once-in-a-lifetime opportunity to see how this genius of the Renaissance has influenced and inspired much of the technology we use today.”

Now, I already knew some things about da Vinci and his life, but I learned that in addition to being one of the greatest painters and sculptors of all-time, his ideas about improving the world around him were simply astounding. In a time when no real technology existed, da Vinci “conceptualized a helicopter, a tank, concentrated solar power, a calculator, the double hull and outlined a rudimentary theory of plate tectonics. Relatively few of his designs were constructed or were even feasible during his lifetime, but some of his smaller inventions, such as an automated bobbin winder and a machine for testing the tensile strength of wire, entered the world of manufacturing unheralded. As a scientist, he greatly advanced the state of knowledge in the fields of anatomy, civil engineering, optics, and hydrodynamics.” [source]

He did all this five hundred years ago! I think it’s clear that the assertion made about da Vinci that he was perhaps ‘the most diversely talented person who ever lived’ is unequivocally correct.

Why am I telling you all of this (apart from the fact that it’s fascinating, and I seek to enlighten and instruct)?

Well, I was going to open this blog post by saying that we’re living in uncertain economic times.

But I stopped and realized that that’s an understatement on the same sort of level as saying “Leonardo da Vinci was slightly ahead of his time, don’t you think? If he was alive today, I’ll bet he'd be smart enough to have his own cable-access show, or maybe get a job selling Christmas trees at Home Depot. Possibly.”

It doesn’t quite capture it – and the economic crisis we’re facing can’t be understated. So it got me thinking about the need for companies to cut spending and save money on upfront costs; budgets are being slashed all over the place. But in most cases, companies don’t have the option to stop buying solutions altogether, they just must make smarter decisions about how they spend their money.

Opting for a SaaS solution in order to save their capital-expense budgets makes a lot of sense for these companies. As the always-eloquent and erudite Phil Wainewright points out in his blog, this financial crisis should be an opportunity for SaaS companies to continue to grow.

Phil says in his latest post, “If credit remains tight, then one of the first things businesses are going to cut is capital expenditure — either because they can’t stomach the risk, or because they can’t raise the finance. The upside for SaaS vendors is that those cash-strapped businesses will find the pay-as-you-go SaaS model highly appealing — especially if it helps deliver operational cost savings at the same time. So while the credit crunch seems certain to harm the front-loaded cost model of conventional software sales, SaaS should continue to grow by picking up some of those canceled projects.”

Sing it, Phil. We are in lock-step with you on this kind of thinking.

Additionally, when one considers that among the hardest-hit entities at the moment are the banks and financial institutions, I enjoyed this article (published by AmericanBanker.com) that touts the advantages of SaaS and BPO as an effective way to cut costs in the current economic climate.

To quote the article, opting for outsourcing some processes and choosing Software-as-a-Service solutions “not only reduces the bank's operating expenses and protects them from cost spikes… it can also help institutions reduce their risk through service level agreements. This allows executives to focus their attention and resources on critical areas like customer experience and new product strategy to stay competitive and grow their businesses.”

Banks, as we all know, are not early adopters when it comes to technology. They are forced to remain fairly conservative and are not prone to making broad sweeping changes in the way they run their business. I like the idea that we can help them navigate through this choppy water, and help them look ahead into the future.

Maybe not 500 years ahead like Leonardo… but we’re working on it.




_