Take the Bonus and Run

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We’ve all seen examples of unintended consequences, when situations run off the rails despite everyone’s good intentions. Imagine being the finance guy when sales reps are paid on the quantity – not quality – of contact activity, so they cash in for every last person they spammed on the Little League parent roster.

Motivational speaker and consultant Barry Maher has witnessed plenty of situations that didn’t turn out quite the way companies had planned:

“I worked with one company where bonuses were up to 40 percent of compensation, and they were all paid at the end of March. That meant that the more successful their people were, the more incentive they had to remain with the company until the end of March.

“The downside was that people who had been thinking of leaving the company, and particularly the best people who were thinking of leaving, all gave their notice at the beginning of April.

“Trying to replace that many people at once – and that many good people – left the company badly understaffed and struggling every spring.”

What that company clearly didn’t realize was that its incentive compensation plan was driving undesirable behaviors, no doubt at great cost.

A study conducted by the Society of Human Resources Management (SHRM) estimates that direct turnover costs are 50-60 percent of an employee’s salary. And when you take into consideration that 20 percent of a sales force typically generates 80 percent of revenue, losing a rock star rep can take a big toll on the revenue stream.

Erik Charles, Xactly’s principal compensation strategist, offers tips for retaining top performers that could’ve spared Maher’s client some pain:

  1. Identify turnover spikes. Figure out when you’re most likely to experience turnover. Look at your data from the past few years to see if there are spikes at particular times (say, the month after fat bonuses are paid out?)
  2. Use data to check in with top performers at key times. Are they still hitting their numbers? Any patterns when compared with previous years? If numbers are down for your top people, it could be a sign that they’re looking to move on.
  3. Introduce timely incentives, especially if your internal data indicates a lag in performance and engagement. Think of meaningful ways to show that you value your reps – maybe a one-on-one or small group lunch or an especially sweet SPIFF.

 

Related:

The Real Price of a Rock Star: Recognize, Automate and Compensate to Retain Top Talent

 

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