The sports news world was full of articles last week about the San Francisco 49ers’ Richard Sherman hitting his numbers and earning a variety of bonuses.
But let’s back up on that one a step or two. Sherman had been lambasted in the press and on social media when, instead of using an agent, he negotiated his contact directly with the assistance of his wife in 2018. Of a $39 million contract, only $3 million was guaranteed. Further, it was only set for one year based on performance. With a little rounding, this was an 8/92 plan (8% base guarantee, 92% variable). He accepted tough stretch goals instead.
Per the NFL, here's some of the variable components in Sherman's contract:
Pass the Physical to Make the Team: $2 Million
Given his Achilles issues, Sherman had more faith in his body than others (and the 49ers did a good job of protecting themselves from signing someone who might never heal.
Lesson: When you sign a rep, what is your first hurdle to ensure that they are as qualified as they seemed at the interview? Do you have a test at the end of bootcamp? First month measurable goals for building pipeline? A review of their first sales interaction pitch? How long have you carried great interviewers who never contributed to the company?
Workout Bonus: $50,000
Getting paid a bonus to take the training.
Lesson: I have argued in the past that instead of paying a draw during the early months, companies should make MBO payments instead. It might not seem a lot in the context of his full contract, but it was enough to get him to show up.
The Pay for Performance Measures
Third-party Evaluation: Up to $3 Million
Making the Pro Bowl is worth $1 million, making first or second team is an additional $2 million.
Lesson: This is the externally validated, objective measure. The 49ers management don’t determine if he makes the Pro Bowl, it is a vote on the NFL website split between coaches, players, and fans.
Playtime Incentive: $1 Million
Play for 90 percent of the team's defensive snaps): $1 million.
The Reality: Sherman did NOT make this number (hitting 87.5%), but his team decided that was close enough, and paid it out.
Lesson: If you have a top performing rep who misses a number due to management decisions (changing a territory mid-stream, not budging on contractual issues with a customer, etc.), what do you do? Professor Alan Benson and I looked at when quota relief is given, and we found that the best predictor of quota relief being granted is based on how well the manager is doing against THEIR numbers. The 49ers are pushing their way through the post-season.
Confidence is a Prerequisite for Success
Sherman walked away from a contract with the Seahawks that would have paid him $11 million in exchange for a three-year deal with only $3 million guaranteed, but a chance to earn up to $39 million. His own confidence in his abilities, and an associated willingness to bet on himself, appears to have paid off.
The Big Lesson: How much would you let a new hire bet on themselves? Would you let them give up base for not only more pay at risk, but also a higher level of acceleration of payment amounts for above quota performance? Why not? On Sunday, the Vikings did whatever they could to avoid throwing the ball anywhere near Sherman (their quarterback admitted that was part of their offensive strategy). When they forgot, he intercepted the ball leading to another 49er touchdown.
About Richard Sherman
Richard Sherman describes himself on Twitter as: “SB48 Champ 5x NFL All-Pro 3x(1st) 2x(2nd) 5x Pro Bowl Stanford Alum SF 49ers CB I Earn the respect I am given. Confidence is a Prerequisite for Success”.
About Erik W. Charles
Erik W. Charles describes himself on Twitter as: “The Mad Scientist of Marketing, Incentives Guru, Employee Motivation Instructor, & VP Solutions Evangelist @xactly”.