Why Pay Sales Commissions?

Adam linked to a thoughtful article written by Fog Creek Software that described its rationale for switching to non-commission-based comp plans for its sales team.  The article spurred some interesting thoughts as well as a burst of tweets from some developer friends and colleagues - presumably because the article reflects a developer perspective.

So I thought I would jot down some notes for posterity.

In short - different jobs require different skills that require different incentives. Selling and coding are incredibly different tasks and thus shouldn't be comped the same.

For our purpose at Argyle, sales reps execute a process over and over. Unit-based incentives work incredibly well for these tasks.  The best sales people are coin operated - if you create a properly aligned commission plan, they'll do exactly the things that earn them the most money...which are hopefully the things that create value for the company.

Software developers solve complex problems over time.  Unit incentives are demotivating when tied to these tasks.  Check out this great talk from Dan Pink about the surprising impact that incentives can have on motivation.

A commission-less sales comp plan doesn't take away any of the realties of the sales role.  There is still a quota and intense pressure to hit it.  Just without the upside for performance beyond quota.

When done well, sales commission compensation rocks.  I loved getting it as a sales rep.  And I LOVE paying it as a CEO.  I'll write another post about how we've evolved our commission plan over time at Argyle.

Ramping New Sales People

We had a class of 6 new sales people start at Argyle last week. In addition to the usual sales, product, company training, we're doing some interesting things to get this class of (very smart, very eager!) noobs up to speed:

1.)  Just as I do with all new hires - I spent a couple hours with the new folks sharing the history behind Argyle and our mission/purpose/values.  I'm a big believer in mapping the day-to-day to the bigger picture as much as possible, so I like to make sure that new team members get a very clear picture of who we are and what we believe at Argyle.

2.)  The reps earn small wins every day based on their performance and level of activity.  The first rep to complete an assessment call earned a $50 AMZN gift card.  The first rep to complete 5 assessment calls earns a $50 AMZN gift card.  And so on.  Our Dir of Sales Vimal Patel is great at using games and/or small incentives to encourage the right behavior.

3.)  The reps level-up based on performance.  We have a few lead sprinklers that assign leads to sales associates.  Reps earn access to the "better" sprinklers based on their performance.   Reps start out cold calling and dumpster diving in Salesforce.  They will eventually (hopefully!) earn their way to the most desirable sprinkler, which allocates the "I'd like a demo of Argyle, please!" leads.  These leads close more quickly and more frequently, so the they have a very strong incentive to work up the food chain as quickly as possible.  This idea came from Tristan, our Dir of Ops. 

The Importance of Homemade Words

My sister and I made up lots of words when we were kids.  (This is before my brother was born - when we stopped making up words and just taught Evan to repeat the silly things we said.)

The words made no sense whatsoever and I have no idea what in the world we were doing that made us come up with them.  But I'll never forget "chungum", "mezzali", "flowerdymane" and others - nor will I forget what the words mean!

Silly words and acronymns are fun and they're great tools to drive process for teams.  For example, we use the following at Argyle: 

• Demopportunity - the combination of demo and opportunity reminds the sales guys that all demos should get converted as Opportunities in Salesforce.  And that they should think carefully about the prospects that they demo.
• BLUW - this is an acronymn for Budget, Looking, Understands, Willing - which is Argyle's version of BANT.  We refer to leads as "bluw" - pronounced like the color blue - with regularity.  I ask "Is it bluw?" several times a day.
• TWBAGMI - this is an acronymn for "This will be a great meeting if...".  It is pronounced as "T.W. Bag Me".  We don't use it internally, but I think about it when I run meetings to make sure that I'm working towards a goal - either mine or my colleague's.  My friend Matt mentioned the acronymn to me in passing in 2005 and it stuck.

Any homemade words or acronymns you'd like to share?

Dead Simple Start-Up Sales Processes

One of our biggest sales operations hang-ups to date has been the lack of clarity around the sales process and lead/opportunity designations, so I spent a lot of time last week documenting Argyle's sales process and tweaking Salesforce to accomodate.  

We created specialized values (beyond Salesforce's standard values) for Lead Status, Activity Type, and Opportunity Stage and a few flow charts to reflect our view of the world and our evolving sales process.  We discussed as a team this morning.

A few lessons learned:

• The process should be obvious.  It is important that it is very clear to the team how they should log their activities, opportunities, etc.  They've got a thousand things on their plate, so the workflow should be dead simple and straightforward - otherwise you don't get the data or behavior that you're seeking as a manager.  For example, it was previously unclear when the rep should convert a Lead into an Opportunity.  No longer - we set very clear criteria for doing so.
• A very clear process helps the team do their job.  Selling becomes just that - a very clear process.  Deals start to look the same, conversations get more consistent, and punches get tighter.  The goal is to make the process completely repeatable.
• Beware of transition states - objects can exist in limbo forever.  We created new values like "Unable To Qualify" so that leads don't exist as "Contacted" forever and "Closed Dead" so that stalled Opportunties don't sit in the "Negotiation" stage indefinitely.  Everything should move toward a terminal state.
• Recognize that your sales process is always evolving.  We've made some strides recently, but still have a long way to go before we reach the sales process Promised Land.  You can always simplify or augment as necessary.  The sales guys will usually pipe up if something isn't working very well!  

 Thoughts?  Anything else to consider for early-stage, sales-driven start-ups?

Sales People Do Exactly What You Pay Them To Do

The Argyle sales machine is powered by three very talented youngsters:  Danny, Matt, and Clay AKA "DMC".  Even though they're not 15 year sales veterans, they're very quickly learning the trade and very quickly driving results.  

They're also very quickly showing many of the classic sales behaviors!

They follow the money.  We made a minor tweak to our comp plan last month and the team very quickly figured out the types of deals that make them the most commission.  And now they're trying to find as many of those deals as possible.  Similarly, they're quickly learning to make calculations regarding their time, the particulars of the prospect, the likelihood a deal closes, and the likely pay-off.  This is exactly the type of balancing act that you want them to learn as a manager.

They ask for what they need to make more money.  Our product is constantly evolving and we definitely have a few shortcomings in some important funtional areas.  And the sale guys are very vocal about it.  In their minds, addressing these shortcomings will help them sell more product...which will help them make more money!

They ask for what they need to save time...which helps them make more money.  We use Salesforce.com and we have (what I suspect is) a reasonably advanced implementation for a team as small as ours.  But our guys are always driving for more process and cleaner workflow so that they can spend more time dialing and less time administrating.  (This type of process feedback is one reason our team rocks!)

In short - our sales team does EXACTLY what we pay them to do.  Which is why it is critical that sales compensation plans align with broader sales, marketing, product, etc. strategies.  More on this in a future post. 

A Great Idea For Lead Follow-Up Emails

We drive a fairly significant volume of leads through a "download a whitepaper" call-to-action - which has a great conversion rate, but generates leads a bit further up the funnel than a "request a demo" or "free trial" call-to-action.  (I've written about the trial vs. demo call-to-action previously.)

Whitepaper leads can be tough to qualify - they haven't indicated any direct interest in our product, just the contents of the whitepaper.  As a result, our sales reps are very direct in their email follow-up.  Here is an example email we send to our whitepaper leads:

I saw that you downloaded one of our whitepapers, and thus I have a question.

Which one of these categories do you fit into?

A. You're just checking things out and there is no way you want to talk to me about Argyle.
B. You're maybe interested and may want to talk b/c you're learning and have questions.
C. You're dying to talk to me and couldn't wait for this email to arrive to your inbox and you are ecstatic that it's finally here.

Let me know which bucket you're in and I'll act accordingly!

Matt 

This approach works really well!  We make it very simple for the lead to qualify itself.  If the answer is "A" - then great, we don't waste any time on the lead.  If the answer is "B" or "C" - then we spring into action. The anecdotal response rate is significantly higher than the usual boring, email follow-up stuff.  And prospects get a teensy glimpse into the friendly way we like to do business at Argyle.

Hat tip to Brad McGinity from Windsor Circle for recommending the format.

Never Give Unless You Receive

Generally speaking - it is better to give than to receive.

That is unless you're selling something, in which case only suckers give without receiving.  Reciprocity is the name of the game when it comes to negotiating with a prospective customer, partner, etc.  

A very simple example

• Prospect asks for a discount on product XYZ.
• Rookie says "OK".
• Killer says "Sure - I can give you that discount on an annual agreement executed this week".

This is a difficult discipline to build because most salespeople are natural pleasers - who doesn't want to make the customer happy by giving them what they want?!?  It takes a lot of confidence to tell a prospect that is ready to buy "no", in part because it is always sooo tempting to just get the deal done.

The reality is that a lack of this discipline can get very expensive, very fast.  A skilled negotiator on the other side of the table is going to keep asking until the Rookie says "no" and tear the rep to shreds in the process.  (I've been on the giving and receiving end of said shredding process!)  

Putting a condition on most "yes" answers is a great way to diffuse this problem.

The Sales Break Up Voicemail

If you've ever worked in sales, then you know this routine:

• Lead pops up via free trial, whitepaper download, demo request, etc.
• Sales guy immediately calls lead...no answer, leaves voicemail and sends email.
• Sales guy tries to contact lead for a week or two with no response - leaves more vmails, emails.
• ...
• Sales guy eventually moves on to the next lead.

 This is a universal occurence and of couse we deal with it a lot at Argyle.

I recently read a blog post about leaving a "break up" message with these leads.  (Can't remember the source - will add a link if I can dig it up.)  Instead of the standard follow-up stuff - thanks for your interest, just following up, value proposition, etc. - the break-up message is literally a break-up:

Hey there - it's Eric calling from Argyle.  I've tried contacting you a few times regarding your recent inquiry.  We haven't been able to connect, so I'm guessing you've moved on to other options.  If there is anything I can do to be helpful, please don't hesitate to call - otherwise, this will be the last time I contact you.  I appreciate your interest in Argyle!

We've started doing this at Argyle...and it works.  Don't have any quantitative data, but the anecdotal evidence is pretty compelling!  Prospects call back and they respond to the email.  And if they don't, then your sales reps don't waste anytime chasing down prospects that aren't ready to start the sales process.

I suggest giving it a shot.