• What to do with salary risks?

• What should the bonuses and bonuses be?

• How not to cheap out and not overpay?

In this article, I tried to interestingly and thoughtfully analyze my experience of working with various material motivation schemes.

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It is easy to imagine how many times I had to see how employers try not to pay sales managers and vice versa – how managers try to get what they did not agree on. Salary, like any free price, is always a compromise between the seller and the buyer. In order for the employer to be happy to pay bonuses, and the sales manager to receive them, you need to understand the logic of reasoning from both sides. Let’s talk about the employer’s logic.

So, let’s start with the salary part. A rather complex contradiction is connected with it. Salary is always salary risks for the employer, which he does not want to take on. However, he is forced to do this in order for the vacancy to meet the expectations of the candidates.

Two types of salary risks can be distinguished. The first is that material motivation requires material costs, and this does not give motivation. That is, the employer is obliged to pay a certain amount, and the employee is not obliged to work it. The second risk is that, despite all the efforts of the employee and the salary paid to him, there are still no sales. Obviously, it will be impossible to recover the costs.

In the first month, the manager apparently does not have to sell anything yet. In the second, he has a lot of hard work and real expectations that significant amounts will come from day to day. In the third month, the manager says: “Yes, there are no sales. If you want, fire.” And the manager is faced with a difficult choice – to really release and get rid of the invested efforts and funds, or to wait a little longer, hoping that something will happen.

From the point of view of the profitability of the sales department, salary risks are the main channel of losses. You can’t bear such risks, because scaling for them is impossible.

If you reduce the salary, it will be almost impossible to hire effective sales managers. If you increase it, the risks increase. They are especially noticeable with a long deal cycle and a high contract price. Moreover, it is in this configuration that candidates have the highest salary expectations.

Some employers try to hire minimum wage workers. They reason that if the manager is confident in his ability to sell, then the salary does not play a big role. In addition, with the help of a small salary, there is hope to insure against employees who are not going to sell.

The problem with this approach is that the hired employee has one source of income and cannot diversify. Since his salary depends on sales, he wants to have all the necessary resources for this:

• Good product and process training within the company;

• Possibility to place a reserve in the warehouse;

• Take a presales support engineer to a meeting;

• Get to the general director and directly solve any issue;

• Present at the stand, if the company participates in the exhibition, etc.

A good salary increases the chances that the candidate who started the job will not be left and he will get everything he needs for big sales. Therefore, experienced managers simply do not respond to vacancies with small salaries.

The task of the employer is to indicate a competitive salary in the vacancy and in the future keep his word not to deceive the candidate.

This is solved using the logic laid down in the Labor Code. It says that if an employee does not go to work without valid reasons, he is not paid for that day.

Let’s try to continue this logic and answer the question of what will happen if the employee did go to work, but did not work. For example, the turner crossed the passage, but did not reach the machine. Does he need to pay for this day? From the point of view of legislation, everything is complicated. And from the point of view of entrepreneurial logic, yes, but from the calculation of the full salary.

Let’s continue to think. If the turner stood at the machine, but did not turn what was needed, or simply not enough. Do you need to pay for such a day? If we translate the lathe metaphor to sales management, two conclusions arise:

1. There are no unconditional salaries. Certain conditions must be met to receive any salary.

2. It makes sense to divide the salary into parts and tie it to several conditions.

In this way, several types of salaries appear.

Composition salary

The first part of the salary can be paid simply upon the employee’s arrival at work. The second – if the employee is working at work, i.e. performs intensity indicators (calls, meetings). And the third is paid if the employee does what he was hired for – performance indicators. In our case, the sales plan.

If we take a salary of sixty thousand rubles as an example, it can be divided into three equal parts: twenty for going to work, twenty for the call plan, and twenty for the implementation of the sales plan. Plus a percentage of revenue or profit so that when the plan is implemented, the total income is 120-150 thousand rubles.

The described scheme is the most logical, but the most rigid and rarely used in practice.

Accumulated salary

It is used where there is a low check with a high margin, a short deal cycle and a short period of time for the sales manager to get on the plan. Under this scheme, all money received from customers since the beginning of the month goes to the manager’s salary, and after the salary is accumulated, the manager receives a standard percentage from the remaining deals.

In this case, it is difficult to tie indicators of intensity or efficiency to salary, so these indicators are often managed through the distribution of the incoming flow of applications.

Regressive salary

It is used where the manager can build his customer base and make sales to old customers.

For the first two or three months, the employee is paid a substantial salary. This is a kind of advance. After the expiration of this period, according to the logic provided by the employer, the manager must achieve an acceptable level of income through sales. If this does not happen, the employer’s salary risks are reduced by reducing the salary. This makes it possible to increase the waiting period for sales, so that the return on investment is more likely.

For an employee in this scheme, the level of risks is also reasonable, because on the one hand, the employer pays for testing the hypothesis of whether sales will go well or not, on the other hand, if sales do not go well, then you will have to resign in any case.

Proportional salary

It is a proportional salary payment depending on the performance of the intensity indicator. For example, when the indicator is 90% fulfilled, 90% of the salary is paid.

The scheme is often used for remote sales managers. Upon agreement, the manager can switch to “half-time”. And here the intensity indicators, salary and sales plan decrease proportionally.

This, in my opinion, is the most adequate scheme, provided that the manager has no obstacles to fulfilling the standard on calls. Such obstacles can be a non-core load, technical difficulties, lack of a base for calls.

Bonus for completing the plan

In the component salary, this bonus is included in the salary itself. However, if the manager completed two plans, then it is logical to pay an additional amount equal to the same part of the salary. In other cases, a fixed amount is determined, which is paid in full during the execution of the plan. Accordingly, during the execution of two plans, two such amounts are paid, etc.

The plan is a “plan” indicator. It is either done or not. Therefore, the bonus in the execution of the plan is either paid out in full, or paid out at all.

Adequacy of the project is a parable in languages. Increasing the plan every time the manager has fulfilled it is a bad sign. This is just one way not to pay the bonus. The plan is usually reviewed annually or less frequently.

To determine how feasible the plan is, it needs to be decomposed. Let’s imagine that the plan requires four deals. Taking into account the conversion, to conclude one deal you need to conduct, for example, three. It turns out that there should be 12 deals in active development. Each transaction requires an average of 10 calls and one demonstration. In total, this will require four hours of pure time. Multiply by 12 transactions, it will be 48 hours. An average of 168 hours per month, 48 of which will go to negotiations. In my opinion, such a plan should be feasible. This is a very rough calculation, but it will show an exemplary picture. It hardly makes sense to think more precisely.

Sales bonus

The easiest and most correct way, in my opinion, is to pay a fixed percentage of all sales.

It is desirable that the percentage is calculated from the receipts, and not from the revenue or profit. Income is the money that came into the account. Win, it’s spent money, that is. those for which obligations are fulfilled and closed by acts. Profit is what is left after that.

At one of the clients, I observed a picture of how the premium was calculated from the profit from the project, while the project itself lasted from six months to a year and its profitability could only be calculated at the end. Sometimes it was negative and the manager did not receive a bonus. Do we have to say that such a scheme of motivation is rather demotivating.

In conclusion, I would like to say that the logical parity scheme of material motivation indicates several advantages of the employer at once. First, he was used to working long hours; secondly, used to fulfill obligations; thirdly, the company is managed by experienced managers; fourth, the company manages its own finances, so they are likely to be there.

And how is your motivation scheme built?

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