SalesForceXP: May/June 2008 Coverstory: Sales Salvation

FEATURESTORY

Sales Salvation

by Paul Nolan

For sales managers, a traditional incentive program is a lot like a homily: You stand in front of your congregation, preach the good word, and see who it resonates with.

Sadly, the result is no different than what a good preacher reaps. Those who bought into the message to begin with continue to do so, while the masses may have good intentions, but often revert to their old ways.

The message, no matter how solid or self-redemptive, never seems to take hold.

Whose Message Is It?

Dave Smith of BI, a Minneapolis-based business improvement company, argues the reason that sales missions handed down from on high are summarily dismissed is because they aren't the recipients' mission. There's no ownership—no buy-in—hence there's no real obligation to carry it out.

Smith is Product Manager of GoalQuest, a sales incentive strategy that he says is a dramatic improvement on the common sales incentive format. "In fact," he adds, "GoalQuest is so unique that it's the only sales incentive design that has received a U.S. patent."

Truth In Numbers

Statistics support Smith's claim. BI has created some 340 GoalQuest programs for its Fortune 500 clients since the methodology was introduced in 2002. Nearly 305,000 salespeople participated in these programs through January of this year; 52 percent of them sold more during the period that a GoalQuest program ran than they did during the same period when no GoalQuest program was in place. (See full results in the chart below.)

Imagine if you could get more than half of your sales team to exceed its previous baseline for a 90-day stretch!

There are several factors that make GoalQuest uniquely successful, but it begins with this concept of getting incentive program participants to take ownership of their goals. Before implementing a GoalQuest program for a client, BI analyzes the sales team's productivity both collectively and individually, and recommends three levels of increased performance that participants select themselves.

Total Engagement

Because each participant in a GoalQuest program competes against his or her own baseline (which is established in a previous and similar sales period), the program engages significantly more salespeople than traditional sales contests.

"Everyone has been part of an incentive program where they read the rules and say, "I don't have a shot at this,'" Smith says. "They toss it in the trash and two things happen: You get absolutely no incremental effort from your middle performers, but you do get a little incremental anger because it irks people when the same five or 10 sales reps get recognized."

"GoalQuest, to my knowledge, is the first methodology to leverage a salesperson's own productivity as their competition," adds Houlihan. "You only compete against yourself."

BI defines each participant's baseline as "the level of sales that a salesperson would have reasonably and realistically achieved had there not been an incentive program during the period." The baseline allows a program sponsor to engage all participants, whether they are high-flying pros, middle performers or rookies.

An additional advantage of the GoalQuest structure for program sponsors is that it's risk-free. Sponsoring companies don't spend a nickel until their salespeople redeem points for rewards, and they only receive points after reaching their stretch goals.

For example, a GoalQuest participant may elect to increase sales for the period by 3, 5 or 7 percent over their baseline from a similar time frame. It's a significant step away from traditional quotas that flow from the top down without much room for self-selection.

"If the participant doesn't own the goal — if they feel coerced in any way — no one is going to benefit," says Tim Houlihan, Vice President of Reward Systems at BI.

What's more, this structure allows a company to divide a sales team into smaller subgroups and set unique goals for each. Increasing sales by 3, 5 or 7 percent may be appropriate stretch goals for a group of top performers, yet laughingly easy for those in a middle group. The middle section, then, might select from options of 6-, 8- and 10-percent sales increases, while the bottom subgroup may have to reach sales increases of 7, 9 and 11 percent over their baseline in order to claim a reward.

When a client's sales team is stack-ranked by individual performance, it invariably looks like a hockey stick on its side Ð starting high and tailing off. Smith explains that the ability to adjust goals based on which subgroup a salesperson falls into is a key to increasing success for the individual reps and producing a worthwhile ROI for the sponsoring company.

"Every client asks about the risks of setting different goals for different groups," Smith says. "Our recommendation is to tell people from the start that you've created three groups in order to produce a structure that gives everyone a chance to achieve a goal and earn a reward."

High Risk, High Reward

The second unique aspect of GoalQuest programs — the part that is patented along with the self-selection feature — is an all-or-nothing reward structure. Once participants select the first, second or third reward level, they must hit that goal or they receive nothing.

"If I select the $100,000 increase as my goal, I get nothing if I finish at $99,999" Houlihan says.

So why does anyone select the highest of the three tiers? Because the value of the non-cash rewards increases exponentially. The rewards at Level 3 could be more than six or seven times those at Level 1 and more than double the rewards at Level 2.

All indications are that participants push themselves. A full 43 percent of program participants select Level 3. About 21 percent select the middle tier of rewards, while 35 percent select Level 1.

"I think that tells us that the value of the rewards is a strong driver," Smith says.

Even more interesting is the success rate at each level: Nearly 50 percent (49.4%) of those who select the highest goal (Level 3) are successful compared with about 38 percent of those who select tiers 1 or 2.

"It's consistent with all of the psychological studies on goal setting," says Houlihan. "The people who are most likely to succeed are the ones who set the bar the highest for themselves."