Fish or Cut Bait? – When to Say Enough is Enough!
Ask a group of business professionals to describe a SPIFF or Bogey and you will probably get all kinds of answers. “What is it and if I have it do I need to see a doctor?” “Is bogey a golf or a military term?” How about neither! In sales circles we may have heard or even used these terms and to the non-sales professional it can make as much sense as a babbling toddler. Hopefully in this article we can discuss what these programs are and more specifically how they can be utilized in driving our sales initiatives. SPIFF is an acronym for Special Program Incentive Fund. Why there is an extra F in the word SPIFF is one of life’s great mysteries – much like the building of the pyramids or Atlantis. Bogey as it is used in sales terms is a target or measurement in the sales environment. For our sake we will use them synonymously.
It is up for debate how many distributors/manufacturers use these types of programs to drive sales. When they are planned and orchestrated, SPIFFS/Bogeys are extremely effective in helping direct our sales efforts. These programs can be built around product(s), product groups or even client types. You may have “run” a program in the past to some degree of success. Or, more than likely, a manufacturer may have run a SPIFF and included a distributor as part of that program. In either case one might question the strategy of the implemented program.
Prior to running a program one key question we need to answer is “What is our desired result?”. I know this sounds basic – but so is the majority of business. Our business isn’t necessarily about being the most “sexy”; it is about being extremely intentional in our actions. You might be familiar with the card game Texas Hold’em or the World Poker Tour on television. It is certainly riding a wave of popularity in our country! Even if you haven’t played or seen the game, you may be able to answer the following questions: What would you say the goal is of a player entered into the World Poker Tour? A basic question and probably quite easy to answer! The goal is to be named the World Poker Tour Champion. See that wasn’t very difficult, let’s try another one. This one may be a little more complicated: What strategy would a player utilize in achieving the goal? The strategies that can be employed are many and might involve bluffing early to establish a pattern or betting late to run opponents out. Now for the final question and more specific to the playing of the card game: What about tactics, what kind of tactics would a player use in the World Poker Tour? The tactics might be the specific steps in playing a low pocket pair or attempting to “read” an opponent. All this to say is that the best card players have alignment between their tactics, strategy and goal.
Now as far as programs go, do these tactics (SPIFFS/Bogeys) align with our other tactics, strategies and goals? One of the major disconnects that I see frequently in business is lack of alignment in tactics and the company goal. A great place to begin any program is in answering the following question - How does this SPIFF align with our overall goal? For example, affecting top line growth and margin growth are two totally different animals and as such would give way to different tactics in accomplishing the goal.
Once we have established alignment, most Programs need several caveats. I’ve tried to list some of the key caveats that have plagued businesses in the past. First and foremost, make sure the program is a win-win. Nothing will kill morale more quickly than a program that is not fair to the employees or one that does not address company return. Programs need to be carefully planned and orchestrated in order to provide potential incentive to the employee and long term gains for the company.
Good SPIFF programs have a beginning and ending time. If the program does not have a beginning and ending period it is more than likely a permanent commission program. SPIFFS will typically last anywhere from 30 days to 3 months. The determining factor is the sales cycle. Make sure the time frame matches the sales cycle. The longer the sales cycle the longer the program. Additionally, provide adequate time for employees to understand the rules and make plans to fully participate. Building anticipation of the start date is a great way to motivate our sales force.
Great programs clearly lay out any minimum level of achievement. For example, is there a minimum level of overall achievement for the group in order to reach payout or award status? In these cases, prior to any payout, the group must hit a minimum overall level of achievement. This single fact can aid significantly in bringing together a sales effort - especially if we are attempting to drive both the inside and outside sales forces.
SPIFFS are best run independently of each other. Make each program a very concerted effort. That is what makes it a unique program and allows for products or client types to be targeted. I would suggest running no more than three per calendar year. This allows for a concentrated endeavor. Also it allows for a rest period between programs so (1) it does not become an expectation, and (2) efforts can be extremely directed. Additionally consider the cyclical nature of your business and run SPIFFS in the “valley” periods to enhance financials.
In order for a program to affect individuals to make changes in behavior, the program must offer payouts or rewards that are substantial enough to gain individual’s attention. Consider non-monetary awards for SPIFFS. Several that I have run in the past have been on a semi-competitive basis. One program that yielded great success was in a hand tool line. At the time I had about 40 sales professionals covering the state of Texas. In order to have payout of the awards the group had to sell $ 150 k over a 3 month period of the hand tools. This was a brand new line for us and we had no previous sales. Individually the sales professionals were paid a rate of 1.5 times their normal commission rate on each of the product sales. This provided individual incentive to drive sales. However the larger part of the program was the placement awards. The prizes for 3rd place was a $ 500.00 bonus check and a complete set of home tools, 2nd place was $ 1000.00 and a set of home tools and the 1st place prize was 2 airline tickets anywhere in the United States and $ 1000.00 cash for the trip. Needless to say the competition was fierce. The program results were 3 month sales of a new line of hand tools of $ 190 k – subsequently, annual sales of the hand tools were $ 600 k. We organized the SPIFF to coincide with our annual sales meeting. This meeting was usually several days and concluded with a dinner for our sales professionals and their spouses or significant others. You would have thought it was the Academy Awards when we announced the winner. We had the tool boxes shined up and highlighted on stage and big checks made up for the event. It was a great evening and a true win-win!
The final caveat is to consider developing a program with a manufacturer/ distributor. In the above case, our tool manufacturer underwrote about 40% of the prizes and the award dinner. They got a much needed push of their product in the state and some great publicity from 40 sales professionals. In working with a manufacturer/distributor I would caution you to look for alignment of goals. Just like the first caveat, the program needs to be win-win between companies and the individuals in each of the companies.
Don’t be afraid of venturing outside your normal compensation program to run a SPIFF. Additionally, SPIFFS can be developed for non-traditional commission positions in our companies. This is the “fun” part of business so try and make it as enjoyable as possible. If I can be of help please call or email. Remember, business isn’t for the faint of heart – it is hard but rewarding work! Hard work pays off!
Ever heard the expression fish or cut bait? In the south it is used quite often. It describes making a decision to do one activity or the other rather than trying to accomplish both at the same time. So if you were struggling to do a couple of activities at the same time someone might say – Hey Mitch, its time to fish or cut bait! It is also a statement that means it is definitely time to make a decision.
As it refers to our sales force, have you ever asked yourself if it is time to fish or cut bait with a particular employee? How do you currently make that decision? I know when several managers are around their counterparts the decision seems to be very easy. “Why don’t you just fire so and so” or how about the sage advice that begins with “you know what I would do?” or the famous “you should have done”. Employee issues may appear to be best handled by someone outside of the company; however this is very rarely true. Why not let outsiders handle employee problems? For one they never have all the facts that a working manager would have. Additionally, they are usually looking at making short term actions based on quick results. Seldom are businesses run on short term results.
Back to the original question, when is it time to fish and when’s the time to cut bait? Prior to answering that question let me first say that in my past history I have been a miserable failure at making this decision. I have freed individuals to pursue other careers with entirely too much haste and I have tolerated performance and attitude issues far too long. If the truth be told, you may fit in one of these categories or somewhere in between. One more caveat and then onto the meat of decision making. I am not an HR expert; in fact I have probably put a few gray hairs and many a wrinkle in HR’s life. So, prior to releasing an employee check with a HR expert and verify your states laws.
Deciding to finally release an employee or to invest the sum of your company’s resources toward them is a very liberating experience. In fact, in the majority of the cases you are not only benefiting the company but the individual as well. Now here are a few thoughts related to your employees.
Have you done your homework?
What is the basis for the decision? How many metrics have you used in measuring performance? Rarely, if ever, is one metric enough to measure sales professionals. Unfortunately, in the majority of our businesses we use one or two key metrics, sales and gross profit. These two numbers don’t tell the whole story nor are they enough to make an employee decision with. Consider the stages of the sales process. If you have not articulated the stages of the sales process to your sales force it is nearly impossible to measure and manage a force with them.
For arguments sake lets say the sales process to new accounts involves five steps: (1) Prospecting, (2) Appointment setting, (3) Discovering Needs, (4) Value Proposition, and (5) Presentation. Consider that the employee in question has low sales numbers. We then base our initial decision on that number exclusively. Digging deeper we find that this individual is a great prospector - in fact they lead the company in the number of prospects that they are finding. They do a fair job at appointment setting but a below average of discovering needs. If our decision is based on sales numbers, we may lose an excellent opportunity to find and develop prospects, one of the hardest tasks in the sales process. And think about if we can increase this individual’s ability to discover needs – our sales capacity and efficiency have increased dramatically without having to release an employee. The key point is to make sure that we have done our homework prior to making personnel decisions.
Will this decision be a surprise to the individual?
Sounds like the normal answer to this question should be “No”- correct? I have been involved with many terminations when the individual being terminated was shocked and had no idea it was coming. In those cases, it was either the manger or myself who was wrong. Only in extreme cases should a termination be a surprise to an individual. This implies that measurements, coaching, resources and correction measures have been utilized.
Here are some ideas to avoid surprising a sales professional in termination or giving them a distorted performance view. I would suggest at least 3 performance reviews a year for your sales force. Make performance reviews an integral part of your management style. We all make comments and critiques along the way, but consider having multiple formal reviews. Consider these times as great opportunities for planning and adjustments.
Don’t tie any of the above reviews to a compensation conversation. Have the compensation review conversation at a different time. This is due to the fact that when performance and compensation are tied together, the employee is concentrated on one thing - “the number” - and the manger is concentrated on another thing - “the message”. Communication is not taking place in this setting.
Ride with your sales people at least once in between the reviews. Don’t necessarily announce the date and time, You want to see the natural sales person, not the one who told the client that they are bringing their boss out next week. Ask fair but tough questions prior to each stop. What is your objective here? What is the overall strategy on this account? Is it effective for us? How do you determine success or failure at this account? These are fair but tough questions.
Have you given of resources freely to enable this individual?
As managers we all have resources that are available to us. And we have the responsibility to direct these resources toward our clients and employees. As it relates to sales professionals, some of the resources are: house accounts, training, product knowledge, key account contacts etc.
In managing sales forces I have seen managers make sales people “prove” themselves over a multi year period of time in order to begin giving freely of resources. If this is your situation it may be indicative of poor hiring practices. We would not treat mangers this way and we should not treat sales professionals like this either. It is one of the reasons that the sales profession has a high turnover – poor management practices.
We would not think of hiring a driver and only giving 4 gallons of gas daily until they have been with us for a period of time and then ask the driver to figure out a way to do their job and maintain delivery standards. Why do we do this with our sales professionals? I believe it boils down to planning for failure. We hire several, and hope that one makes it through this “boot camp” and at that point we can empower them.
Tougher hiring practices can have an enormous impact on finding the right employee. Consider these two simple words – don’t settle. That may mean paying a little more, or going without for a longer period of time or longer second interviews. But ultimately don’t settle. If you expect higher than average results it is highly unlikely that you will achieve them with less than desirable candidates.
Giving of your resources also means that we are making a personal commitment to the employee not just a financial one. Resources are not only physical in nature but are reflected in support and in time spent with the individual. While very difficult to measure it is easy to see and experience. This commitment is made easier when we have the appropriate employee hired via our tougher higher policies.
Overall the decision to fish or cut bait is not a difficult decision, however the homework behind the decision is very detailed. Put into application, the rewards far outweigh the cost and that is a great investment in anyone’s book. Remember as always no one said it was easy and Hard Work Does Pay Off!