Ride the Economic Wind…Don’t Get Blown Away in ‘09

It’s been a wild economic ride—slide, many would call it—this past year. And the only thing certain about the coming year is that it will be shaped, squeezed and knocked around by continued consumer uncertainty. Because buying cycles promise to be so unpredictable in 2009, companies need to equip their sales organizations to be able to move smoothly and productively with the dynamics of the business and with the gyrations of local and global markets.

This means acting right now to put in place highly adaptable sales compensation plans for 2009 that enable sales and finance to align with corporate objectives, both long and short term, and clear a path for meeting them. Today more than ever, to hesitate is to lose.

Nonetheless, despite the enormous stakes, experience tells us that only half of all 2009 sales plans will be ready for primetime come January. And if that isn’t dismal enough, regardless of whether they’re delivered late or on time, the vast majority of these plans will be dumbed-down or else overly complex and confusing. Either way, they’ll be ineffective at a pivotal time.

But experience also shows us a way out of this dilemma. Here, distilled into seven key practices, is what you need to do in order to arm sales to make the most of the coming uncertain year:

1. Automate. It worked for CRM. Now try it for sales compensation management. Companies still using spreadsheets to manage compensation are pouring scarce administrative dollars down the drain. Worse, they’ll never be able to achieve top sales performance because they lack the requisite visibility, flexibility, scalability and accuracy that come with automation. You should wish this problem on your competition, not yourself.

2. Model. Don’t rush blindly into implementing new plans or plan changes. This is no time to experiment. Model your plans and plan changes up front to gauge their impact. If you’ve automated, modeling shouldn’t be hard to do.

3. Keep it simple and consistent. If you have more than four key performance indicators, or 10 or more conditions to determine credit allocation and payment release, then your plan is too complex and risks confusing your reps. By the same token, as lead-to-sales times invariably lengthen in 2009, try to keep the long-term mainstays of your plan consistent, to keep reps focused on selling, not calculating.

4. Keep it visible. Give the troops in the sales trenches real-time visibility into plans and compensation processes so they can see how they’re doing towards plan, and how much more they stand to make if they do “x,” “y” or “z.” Once you’ve automated, this kind of visibility via the Web becomes easy.

5. Keep it flexible. Plans should ultimately drive long-term behavior, but you want the flexibility to drive short-term activity as well. Make sure you can react to sudden opportunities and challenges through SPIFs and contests without altering the long-term framework of your plan.

6. Analyze. Knowledge is power. Automating compensation provides a bonanza of useful data on who bought what from whom and for what price and conditions. Leverage this data through analytics for insights into selling patterns, commission spend, plan effectiveness and how to further drive sales performance.

7. Measure constantly. In turbulent times, it helps to use all your senses all the time. Don’t wait until the end of 2009 to measure your plan’s effectiveness. There are bound to be numerous bumps and sudden shifts along the way that will impact your business. You need to stay on top of them with mid-year, quarterly and even monthly sales performance reality checks accompanied as necessary by fine-tunings of quotas, commissions, territories, etc.

While 2009 isn’t likely to yield blow-away financial results for all that many companies, there are key steps that can be taken to keep a business from being blown away altogether - and even to help it prosper in a challenging environment. More closely managing sales performance is one of those steps. Late, confusing, hard-to-manage or overly simplistic compensation plans are roadblocks to optimal sales performance, in both good years and bad.
Why wait for a good year to find out how much of a roadblock your plans have been?

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.

Announcing the Launch of XACTLY REWARDS

I’m excited today to announce our newest product, Xactly Rewards.

Let me tell you a bit about it, because this launch has been getting a lot of wonderful attention in the media, and for good reason, I think.

In the past, I’ve spent time in the blog discussing the benefits of ‘non-cash rewards’, and I think it’s an incredibly powerful tool to use in order for companies to improve performance – perhaps even more so than using the good, old standby – cash.

In fact, a University of Chicago study found that NON-cash rewards boosted performance by an astounding 38.6%, compared to only a 14.6% boost using cash alone.

Why would non-cash rewards be so much more effective than cash at improving employee behavior and performance?

The allure of getting those new golf clubs, or a trip to Cancun, or Springsteen tickets, tends to be a stronger inducement than simply an impersonal amount of cash. Instant gratification can be very powerful, it seems.

Xactly Rewards harnesses that power.

This is the world’s first non-cash incentive application that is directly integrated into your CRM tool. Imagine designing a contest for your sales team, or devising a SPIF for your call center or tech support team, and being able to put it into place with virtually no effort?

Our team built this tool natively on Salesforce’s Force.com platform. We leveraged their infrastructure 100% (utilizing the AppEx code, Web Services and API), which allowed us to rapidly develop and deploy the tool on Salesforce’s AppExchange.

Best of all, companies will be able to test this tool out for themselves with no obligation and no cost. Come check it out – I invite you to TRY XACTLY REWARDS FOR FREE December 1, 2008.

Behavioral Science - Part II

I’m sure everyone has seen the coverage a major oil company received recently when they announced a quarterly profit of nearly $12 BILLION – the highest ever recorded in corporate history.

I’m a CEO, and my company is not a non-profit organization; which is to say, we’re all in the corporate world to make a profit. But twelve billion dollars a quarter is more than a little offensive to me.

The good news is that consumer backlash seems to have begun, and as a result prices at the pump have begun to fall. As a fan of behavioral science, I find these types of sociological tipping points very interesting indeed.

It has always seemed to me as though the demand for gasoline is relatively inelastic. In other words, demand and consumption of gasoline historically has not been materially affected by the price of gas; which is a pretty sweet position for big oil – no matter what ridiculous price they chose to throw at the American consumer, demand for gas wouldn’t fall.

That’s finally starting to change, and the falling prices are evidence of that (not to mention the plummeting sales of gas-guzzling SUVs) – oil companies have finally given consumers the incentive they needed to change their behavior.


Speaking of incenting to change behavior – hey, that’s one of my favorite topics! – let me relate a quick story.

Recently, I found myself on an Alaska Airlines flight, taking me from Here to There. After the flight attendant made the standard safety announcements, she launched into an elaborate spiel about an Alaska Airlines credit card offer. She talked it up in a big way, and clearly knew the program backward and forward. I was impressed – I’ve had sales reps who could’ve learned a thing or two from this young lady!

This got me curious, and upon de-planing at my destination, I made a point of going up to her; I wanted to know if the airline incented her to do this.


She confirmed that, indeed, Alaska Air paid her a small commission for every new credit card account that she managed to recruit from one of her flights.

I complimented her on a job well done and stepped off the plane with a small smile creeping across my face.

Clearly, more and more companies are realizing the power of this type of ‘behavioral science’ – incenting their people in order to elicit the desired behavior.

It does my heart good to see it.

Behavioral Science

The Roman historian Pliny the Elder wrote, “In Rome... the soldier’s pay was originally salt”. In the days before refrigeration, salt was widely used as a preservative and it was also believed to have healing powers, thus it became a currency of the realm.

Etymologically then, the word ‘salary’ comes from the Latin word for salt (‘sal’). Eventually this word salarium came to signify anything given in a stipend form or wages in exchange for labor.

We’ve discussed the idea of ‘non-cash rewards’ in the blog before, but salt was not exactly what I had in mind!

These days, we see forward-thinking companies using compensation strategically; which is to say, companies recognize the need to pinpoint incentives in order to modify, enhance and refine the behavior of their sales team – or any group in the company for whom an incentive may modify behavior.

I like to think of the finance and sales executives who modify and tweak their teams’ compensation plans as “behavioral scientists”; like any good scientist, they experiment with various inducements in order to observe the resulting behavior and thus determine whether the desired effect has taken place.

While there is plenty of art to setting comp plans that achieve the desired effect, there remains a heaping helping of science to it as well – in the sense that one needs to fine-tune plans over a period of time to see what’s working and what’s not.

This harkens back to the crucial piece of why we pay variable compensation in the first place: we expect it WILL change behavior. With this in mind, why would you ever want to do this without giving everyone involved real-time, web-based visibility? Without this level of dynamic access to your data across your entire organization, how will you know in a timely fashion if success has been achieved?

Or when small tweaks do need to be made, how can one feel comfortable with the possible outcome without modeling the possible changes using some specific assumptions? Tinkering blindly with an Excel-based compensation structure is a recipe for disaster.

With an on-demand compensation system, a company achieves a real, tangible competitive advantage. Several models can be quickly tested and refined without affecting any of your field personnel. When a SPIF program or new comp plans are ready to be launched, your company has the ability to move in a swift, nimble fashion.

People like to throw around the idea of ‘strategic advantages’ that can help give a company a leg up on its competition, but few strategic advantages have this ability to streamline your entire organization.

Let me illustrate what I mean with a real life example: Recently, a nationally-known auto parts retailer instituted these types of changes in their company. Faced with a struggling economy, a set of executives decided to look for innovative ways to boost their same-store sales. They settled on incenting their floor employees with variable compensation in order to sell more product; and they extended this also to their shop employees as a way to get them to open (and close) a higher number of service tickets per day. In addition, they gave their people web-based visibility into the compensation system so they could see, dynamically, what they were earning.

Prior to the launch of this new direction, several executives of the auto parts retailer expressed their concern that there was sure to be backlash from parts of the rank-and-file, because hourly wages for these in-store employees were cut nearly in half – though their potential for earnings became far higher than before. Management even expected a noticeable amount of attrition; surely hourly employees would quit in significant numbers if they were unwilling to be subjected to this new, unknown direction?

However, the result was a roaring success. Same-store sales jumped significantly and one region reported that their shop employees were getting through roughly four times the number of service tickets they had previously.

What originally had started as a pilot that might slowly be expanded around the country, immediately became fast-tracked for a wide-scale rollout.

This forward-thinking company is experiencing the benefits of conducting some behavioral science in the name of improving their business.

Throw on a white lab coat and join me as a part-time behavioral scientist – I think you’ll enjoy it.

“Science is a wonderful thing if one does not have to earn one's living at it.”
--Sir Humphry Davy (1778-1829)
Scientist, inventor, the pioneer of electrolysis, laid the groundwork for modern chemistry

Part III - Rewarding Behaviors: Automate Call Center Rewards

Automate Rewards to Further Drive Call Center Performance

The main reason why non-cash rewards are underutilized and undervalued in call centers is that managing an effective rewards program is a complex task – from creation to fulfillment to accounting and compliance. To simplify the process, organizations dumb-down their rewards programs, leading to less than optimal results. But there is another and better way to simplify the process and that is to automate it, end to end. That way the program can be as sophisticated and flexible as it needs to be. However, automation of rewards incentive programs hasn’t been an option until very recently.

As odd as it seems, there are still pockets in some companies that resist automation, relying instead on error-prone spreadsheets and time-consuming manual processes. Call centers, on the other hand, are enabled by automation, and the automation required for effectively implementing and managing rewards dovetails with the automation already in place for strategic CRM and performance management processes. Today, rewards program automation can bring to call centers the ability to:

• Tailor rewards programs to individuals, groups and teams. Freed from manual processes, non-cash rewards programs can be precisely tailored to any number of call center employees across any number of functions from outbound sales to customer service to full account management. Personalization is no longer an issue, and complexity is no longer a stumbling block.
• Align rewards to the success of multiple concurrent call center initiatives. Automation enables non-cash rewards programs to be easily designed and implemented for enhancing customer service (tied to call handling metrics), technical support (tied to case/issue resolution rate), teleprospecting (tied to qualified prospects), and general customer satisfaction, to cite a few examples.
• Offer the largest selection of value-oriented, tangible rewards. Automation enables you to create and maintain immense catalogs of rewards online – from millions of leading brand-merchandise items to tickets to entertainment and sporting events to travel, adventure and hotel packages and adventure options throughout the world.
• Integrate with CRM applications to streamline administration, provide visibility into attainment, drive recognition, and accelerate fulfillment. This benefit is huge. Just envision a call center agent’s action (an up-sell, cross-sell, etc.) being registered in the CRM system, and having that action automatically rewarded with the assigning of reward points. Then imagine that agent being able to view an online compensation statement to check how many points have been awarded (and/or redeemed) to date, all within the familiar CRM application. And then imagine the agent being able to check an online catalog of prizes to see what can be had in exchange for their accumulated points – again, all within the CRM application.
• Ensure compliance. Non-cash rewards incentive programs are considered compensation based on their cash value. The headaches this can cause in accounting have been a drag on the use of non-cash rewards in the past. Once the rewards management process is automated and not reliant on spreadsheets, the complete and accurate information required for withholding and reporting for income tax purposes is easily available to accounting departments, making non-cash rewards easy to track and audit as part of the overall compensation process.
  

Cash may be king, but its reign isn’t all encompassing when it comes to motivating behaviors in the call center, or anywhere else in business. When automated, aligned to strategic initiatives and integrated with CRM applications and your total compensation plan, non-cash rewards incentive programs can be just the thing to motivate and sustain exceptional behaviors.

Fortunately, the gloves are now off in regards to non-cash rewards—meaning you don’t have to rely on management-by-spreadsheets anymore. Parallel trends in enterprise mash-up technology, Web 2.0 standards, web services and on-demand software functionality have come together to enable all the automation, personalization, visibility and integration you need to create, deploy and track sophisticated and effective non-cash reward incentive programs. In doing so, and thus making room on the kingly throne for non-cash rewards, you greatly extend your mix of potential incentive options for optimizing call center performance and employee morale and loyalty.

Part II - Rewarding Behaviors: Motivating Call Center Staff Best Practices

Motivating Call Center Staff – Best Practices for Implementing Rewards Programs

Rewards have the potential to drive long-term strategic behaviors, increase call center productivity and combat personnel turnover. Non-cash rewards incentive programs in particular can be extremely compelling when wielded properly. They can be even cheaper than cash as a motivating tool (i.e., perceived vs. actual value). But it takes a consistent, programmatic approach to make non-cash rewards truly pay off on their full potential. And that takes the following best practices.

• Make it personal. You want the ability to personalize incentives by individual, skill level, staff type, job responsibility, etc. This is where non-cash rewards most clearly shine. A rewards point system on the front end, with points redeemable for a wide array of prizes (the wider the better) allow employees to self-personalize their program, honing in on the prizes that are most meaningful to them, whether it’s a riding lawn mower, designer purse, season tickets, or trip to Hawaii. Think outside traditional gift cards – they just fence you in.
• Make it obtainable. Many rewards programs fail because the people who need to be motivated the most often feel that attainment is out of their reach. Hence incremental attainment, with real-time visibility into where you stand, is the way to go. Dribbling out small cash payments can actually be de-motivating, but enabling employees to build up non-cash rewards points towards a goal or set of goals has just the opposite effect.
• Integrate with broader compensation programs/goals. Don’t let a rewards program exist in a vacuum – tie it to strategic objectives. If you are compensating variably for up-sell or cross-sell success, then use rewards to extend this strategy. It’s possible for a standalone rewards program to actually negate progress towards a strategic goal by drawing away agent efforts. So use rewards to reinforce, not dilute, your progress.
• Enable immediate selection and redemption of rewards. We live in a culture of immediate gratification, so why not leverage that to your advantage? Give employees visibility into the vast array of prizes they can win, and allow them the ability to redeem points whenever they wish. Let the Internet be your prize catalog and your redemption vehicle – it’s entirely possible.
• Make the process of winning rewards as important as the rewards themselves. You can come home with a raise in salary, but you’ll probably never hear the family say, “Great, now get out there and get another one tomorrow.” But you can come home with points towards non-cash rewards, and it’s a safe bet that someone in the family will encourage you to rack up more so they can “help” you redeem them. This is yet another aspect of the motivating power of non-cash prizes, and another reason to make the Internet your prize catalog.
  

A final and essential best practice for managing a successful rewards program is to automate the process. You can’t adequately apply any of the above best practices if you rely on spreadsheets and manual processes to track your program. Hence Part Three of this series focuses solely on how to automate while leveraging your company’s existing investment in CRM and performance management.

Upcoming Webinar: Motivate and recognize your top performers with non-cash rewards programs and incentives

This upcoming webinar expands on one of our previous posts:
The Power of Linking Non-Cash Incentives to CRM


Introducing Xactly Rewards for Salesforce Force.com: Leverage your CRM Investment & Increase Adoption

Motivate and recognize your top performers with non-cash reward programs integrated directly with your Salesforce application. Empower your sales, marketing, support and call center teams to effectively run contests, special performance incentive funds (SPIFs) and other incentive programs with immediate redemption for millions of leading brand merchandise items, travel & leisure options, tickets for theatre, concerts and sporting events and more.

Join Xactly and Astadia as we discuss the impact this new and innovative application can make throughout your organization.

Date: Wednesday, June 25, 2008
Time: 11:00 AM – 12:00PM PST

Join us and learn how to get your first 90 days free!

Register to learn more: https://www1.gotomeeting.com/register/602120293

When it comes to incenting behaviors non-cash rewards are typically under-utilized, yet they can be extremely effective in driving behavior in ways that cash compensation can’t. Cash is king, but cash is impersonal and predictable. Non-cash rewards, on the other hand, are extremely engaging when the prize is something that the targeted recipient truly wants and considers worth striving for. In fact, a University of Chicago study found that using non-cash incentives improved employee performance by 38.6% vs. 14.6% for cash rewards.

With Xactly Rewards for Force.com, you can quickly automate these programs and tie them to activity in your Salesforce CRM application while providing immediate access to the widest possible selection of value-oriented tangible rewards.

Join Xactly and Astadia to learn how this revolutionary application can impact the performance of your sales, marketing, service, support and call centers.

Register to learn more: https://www1.gotomeeting.com/register/602120293

Learn more about Xactly Rewards for Force.com: http://www.xactlycorp.com/resource_center/Rewards_ds.pdf

The Power of Linking Non-Cash Incentives to CRM

When it comes to incenting behaviors, non-cash rewards are typically under-utilized, yet they can be extremely effective in driving behavior in ways that cash compensation can’t. Cash is king, but cash is impersonal and predictable. Non-cash rewards, on the other hand, are extremely engaging when the prize is something that the targeted recipient truly wants and considers worth striving for. A vacation at the beach. An adventure package. Designer fashions. A day at the spa. That new set of golf clubs. The key is to let each individual decide what prizes motivate them the most – call it self-personalization – and then show them a way to attain them through their go-the-extra-mile actions. All-too-predictable fixed-prize contests don’t come close in their ability to engage desire and personalize motivation. And those gift cards? Twenty-seven percent of them are tossed away, estimates Consumer Reports.

So how do you leverage non-cash rewards effectively? There are several steps. The first is to automate their management. One reason today’s non-cash incentives are treated as one-offs and limited to fixed-prize giveaways is because they are tracked manually, typically in spreadsheets. Hence they have to be simplified. When you apply the same type of automation to tracking these contests as you do with tracking your sales leads and progress via your CRM application, you can start developing sophisticated, yet easily manageable, non-cash incentive programs precisely tailored for each specific audience or individual within the sales organization or across the entire company.

The next step is drive performance by delivering the widest possible selection of value-oriented tangible rewards. Give each person something personally meaningful to shoot for. Give them the ability them rack up points, with the points immediately redeemable for the prizes of their choice. This means leveraging the Internet for prize selection and points redemption, as well as for the power of instant gratification.

The final step is integrating your non-cash rewards program management with your CRM application. From a process standpoint, this provides the ability to tie actions to points automatically – for example, a lead becomes qualified, then points are automatically assigned and immediately viewable within the CRM application. From a visibility and instant-gratification standpoint, recipients and their management gain the ability to check earned and redeemed point balances at any time while logged into the CRM application, and instantly redeem their points online. And from an ongoing motivational standpoint, they can see how they earned their points, and how they can earn more.

We recently had a little fun in creating a video that promotes our Xactly Rewards product, which addresses the complexity of creating and managing an effective non-cash rewards program. Enjoy!