Don’t fight the gamers! Instead, build your incentive plan hoping they will find every possible way to earn their badges, bonuses, and checks.
What Game The Plan Teaches
Tap into the science of motivation, use three kinds of data to fine-tune your incentive strategies, and unleash the power of your incentives.
You’ll learn how:
- Incentives have driven behavior throughout history, from the era of swashbuckling pirates to the Napoleonic wars, and the roaring 20s to today’s data-driven society.
- To use data to diminish the wars that typically wage between sales and finance, help them speak the same language, and finally feel the love!
- Gain insight into your organization’s unique performance by comparing it to the world’s largest collection of empirical performance data and industry-specific benchmarks.
Page 5.Pirates of the Compensation
Pirates of the Compensation
Pirate captains are known more for swashbuckling adventures than for developing a management structure highly focused on engaging, motivating, and retaining their “employees.” But that probably shouldn’t be the case. To better understand how incentives worked on the high seas, let’s spend a day in the life of Captain Morgan.
Recruitment, Engagement, Motivation — Pirate Style
The dress code may have been much more relaxed on ships, but it turns out that Captain Morgan had a lot in common with today’s CEO. His goal was simple: get as much “booty” as possible by terrorizing the Spanish Main better than his competitors.
Like the average CEO, Captain Morgan experienced pain points. First, he had to recruit and retain the manpower necessary for successful plunder. This meant competing with merchant ships and the Royal Navy for the best men.
Second, he had to motivate the crew to be as productive as possible, while incenting them not to steal booty — a pretty tall order when you consider the lack of ethics and morals of some of these bad boys. But he could not do so with an iron fist or in any way that was contrary to the crew’s goals. Otherwise, he would be walking the plank.
Lucky for Captain Morgan, recruitment was made easy in large part by the captains of the merchant ships. Those captains had one goal: to make the absentee owners of the ships happy. But quite often, this came at the cost of the happiness of crew members, who were frequently cheated and treated cruelly. These crew members didn’t need much convincing to jump ship.
With crews in place, Morgan and other pirate captains made sure they toed the line by incenting them to adhere to a strict code of behavior. While important positions such as captain, quartermaster, and surgeon received a bit more of the bounty, for the most part the loot was divided evenly among crew members. A motto of “no prey, no pay” motivated all pirates to put forth their best efforts. Those who attempted to steal bounty were swiftly and severely punished. Pirates knew that if they performed, they would get their fair share of the loot, which made them less likely to pinch it, and more likely to work as a team.
Finally, the best incentives involve a payment or concession to stimulate greater output or investment. Merchant seamen on the job between 1689 to 1740 earned 13-33 pounds per year. In comparison, a good day on the water that ended with the capture of a treasure-laden fleet could earn a pirate 1,000 pounds.
If you do the math, it would take a merchant seaman 77 years to earn what a pirate could earn in one day.
How’s that for sufficient motivation to steal, murder, and risk death (if caught)?
Captain Morgan and his men were bad, but they left a legacy when it comes to the understanding and use of incentives. How many CEOs do you know who have rum named after them?
Page 25.Sales vs. Finance: We Can Get Along!
Sales vs. Finance: We Can Get Along!
You can satisfy finance’s need for accuracy, analytics, predictability, and stability, while also satisfying sales’ needs for motivation and flexibility, by agreeing to accelerate sales and using predictive modeling to show what will happen.
With the historical data in your incentive compensation management software, you can:
- Check your quotas to determine if they are too high or too low. Use the information to set high (yet attainable) quotas, remove commission caps, and structure your plan so the benefit of going beyond quota exceeds the cost.
- Consider past and current sales roles, customer needs, competition, and the economy, so you can develop an incentive compensation plan that aligns with these areas.
- Drill into your territories, products, and performers, and create “what-if” scenarios that help you determine where to increase spend for long-term improvements.
- Determine exactly where to allocate funds for training and coaching.
- Determine where quota attainment drop offs occur, and then adjust them to send a signal to reps that encourages them to maximize selling potential.
- Adjust quota timing, so that more reps reach 80% or more of quota. Xactly’s data set shows that in companies with an annual quota, only 60% of sales reps go over 80% of quota. Companies with a quarterly quota, on the other hand, saw a 7% increase!
- Know exactly how much your organization spends on sales compensation, how many people are paid per deal, and whether every person sharing credit deserves it.
- Split your predictive model into three buckets of attainment when forecasting costs — reps that don’t hit their numbers, reps that hit between 80 and 120% of quota, and reps that go above 120%. Once you put a lot of leverage into the plan, you will be able to adjust as revenues increase.
When you use the historic data in your incentive compensation software for predictive modeling, the sales team gets its accelerators and can freely encourage its reps to blow through the numbers. The finance team doesn’t have to worry about breaking the bank, because the data forecasts exactly what will happen. Everyone’s happy.
Page 63. Benchmarking for Better Insight — To Hit Results Out of Sight
Benchmarking for Better Insight — To Hit Results Out of Sight
About $266 billion is spent by U.S. companies every year on advertising. More than three times that amount — $800 billion — is spent on sales compensation. Yet leaders are way more likely to analyze the success of their advertising campaigns than the success of their comp plans.
Sounds crazy, right? But the reason leaders have shied away from better analysis is a historical lack of measurable, comparable, real-life data on incentive compensation management. Organization leaders have muddled along, relying on consultants and past experiences to help them make determinations, simply because they believe there’s no other way to come to informed decisions. Or, they’ve relied on surveys that just aren’t up to the task. It’s not that consultants and surveys don’t have highly valuable insight to offer. Quite the opposite! They do. But these approaches to strategic compensation need to augmented with the right data to provide conclusive insight — and by that I mean data that’s industry-specific, benchmarked, and actionably relevant.
Unleash Bigger and Better Insights
Automation makes life much easier at modern organizations, but it’s far from perfect. On-premise solutions keep data siloed and unable to be aggregated, making it impossible to develop benchmarks. This obscures what leading organizations do differently than lagging companies — and how they measure up against either. Without this information, it’s nearly impossible to make educated, confident decisions that ensure you’re doing what you need to do to motivate performance in your organization right.
Fortunately — and for the first time ever — a new 100 percent cloud-based, multi-tenant compensation software solution enables companies to aggregate, anonymize, and analyze compensation data, then access all the information needed to maximize their compensation investments. (This is where I might get a little self-promotional. Hey, it’s hard not to be excited when you’ve got something this revolutionary on your hands.)
So where does this data come from, and how much is there, really? To give you a short answer, eight years’ worth. For eight years, Xactly has collected empirical performance data from hundreds of companies, hundreds of thousands of customer employees, over a billion transactions per month, and approaching a trillion in compensation payouts — all in an anonymous and aggregated model.
And now it’s at your fingertips, to tell you what to do.