When we manage people (especially sales people), our main goal is this: enable them to bring the best results and performance to the company.
Toward this goal, we invest a lot of time and energy. We set our sales strategies, develop financial budgets, conceptualize marketing campaigns, and execute upon our plans—all designed to maximize achievement of our goals during the year.
Often, in our work, we feel pressure from upper management to enhance market share and to increase performance compared to last year. The company relies on us as “the person ultimately responsible” for results in the sales department. A big part of our company’s income depends on what we do with the sales force we lead… and their performance during the entire year.
Each salesperson typically experiences big pressure to achieve his or her own sales quota and the team’s quota. The kind of sales that we do is not an easy job, particularly in a constantly changing landscape. Due to globalization, our strategy necessarily changes and adapts to continually evolving market conditions. The sales manager and company leadership must continually explore and find the correct formula to obtain results each and every year.
Success is connected highly with keeping the sales team motivated and well paid.
Most sales team members are motivated by these linked objectives:
1) achieve a sales target or quota,
2) receive a good “bonus” as a reward.
3) “background”, but very important, objective psychologically for many (especially in some cultures) is: be a valued sales person—maybe even the best on the team. Money and bonus are indeed important, but recognition sometimes is equally or more important. Remember: we all are human beings and our definitions of “success,” including comparing ourselves to others or to our full potential, can drive us as much or more than any other thing.
So the multi-faceted question for us to consider in our role managing sales people is: As a company, how and what do we need to do in order to
1) achieve the year’s results;
2) keep our sales team members motivated to exceed goals;
3) be profitable;
4) especially important in conjunction with these other objectives keep our sales teams and our key players committed to us—giving them no reason to quit and go to another company.
The answer to this multi-layer question is definitely not easy, and I welcome you, my readers, to please share your thoughts and opinions.
From my perspective, the first thing we need to do is to identify the company culture and vision: be able to CLEARLY understand and be able to communicate what is on the minds of the owners and shareholders. What do they want at the end of the day?
How many times have we worked in a company without understanding the reason why things are being done, why changes are happening, and why we are doing things the way we are told to do them? Without explanation, we can experience much dissonance, including large gaps between what we are being told to do and what we think should be done. Most often, this conflict occurs because we don’t understand the company’s culture and vision.
Communication is a key factor in building unity of action and motivation. We need to talk to our sales people, invite them to share their ideas openly. Encourage an open discussion, in a nonjudgmental space (no ‘right’ or ‘wrong’) without making any person fear that (s)he can utter a “wrong” opinion. In such an open space, sometimes, the best ideas come from the employees you’d least expect. In some cultures, sales leaders even invite their best clients to share their ideas. Human psychology plays an important role here: when sales people feel they are special and a valued part of the company—valued for their ideas, thoughts, and questions as well as for what they bring to the bottom line—then they will feel more like part of a high-functioning family than just an employee or just a cog in the company wheel.
Making your sales team members feel truly like a family member rather than just an employee can significantly impact the results achieved. The following two thoughts/feelings are NOT the same: “I’m working here for financial reasons” vs. “I am working here because I want my company to grow and succeed, and I want us to be number one in our field.”
Let’s envision a successful scenario: Our sales guy is involved, engaged, and feeling very much a part of the family business. Next, we need to find the right formula for the company to be profitable and at the same time pay our sales force in the best possible way. We all know that today the situation in our field is NOT what it was in the old times: we face more global competition, eroded pricing due to intense competition, and lower income margins. Ten years ago, the spreads we enjoyed were 5-10 pips (a “pip” being the smallest price change that a given exchange rate can make), then they were 1-3 pips, and today we have spreads from 0.1 and up. (Some brokers even offer zero-spread. How? That’s a whole separate subject of discussion—stay tuned!) So, the company margin today is much, much lower than ever before. Becoming a competitive foreign exchange (fx) player today requires providing our clients the BEST market conditions and VERY competitive prices. We, as sales managers, have less maneuverability, with small & shrinking margins. We must also take under consideration that the cost of acquiring a client is higher; today a “lead” costs more. Sometimes we need to become magicians in order to find the right combination: Be profitable, pay our employees well, and keep shareholders happy.
One brief aside—for just a moment: The cost of losing an employee is very high—even higher that replacing him. The cost includes not only time lost but also internal knowledge departed. The cost of training an employee, giving him our know-how today (including immersing him in the nuances of our culture and procedures) is extremely high, so in our financial-cost strategy, we simply cannot afford to lose valuable employees. The chance of losing less-than-fully-satisfied employees may be even higher than you think because headhunters and other companies are closely watching how your top sales people are succeeding and then make them proposals and job offers. SO—Invest in employee retention. Do what needs to be done to maintain a balance between maximum short-term profitability and retaining your staff long-term.
So what is the perfect formula to achieve results and keep your model employees happy?
2020 Global Market Outlook: How the “Known Unknowns” Can Affect CurrenciesGo to article >>
First: talk to him/her many times; understand what is important for him or her; what will make this employee feel 100% committed to the company; what impassions this person? (Remember that what we as a company, or I as a sales manager, think is “important” might not be of the same importance to your particular model employee). I read an article a while ago about a marriage that went into divorce.
Someone asked the man: “Why do you think your wife left you?” The man replied: “I don’t know; I gave her all that she wants, everything I have; I provided her the best living environment, so I don’t know why she left me.” The same question was asked to the woman. She replied: “I left him because he did not have time to sit with me and talk to me; I just wanted him to listen to me, and make me feel important for the things that are important to me.” Learning from this example (commonly experienced around the world) let’s extrapolate: To help make someone else happy (whether in personal or business relationships), we must work hard to put ourselves in his or her shoes—ask them questions, listen to them, and truly understand what is important to them—because we share a common humanity. Then aim to honor their values.
Once you have spoken with your employee and understood what is important for him or her, only then focus more narrowly on the financial aspects of your employee’s needs. Try to focus first on aspects of your employee’s needs and values that are NOT financial, and THEN work toward meeting the employee’s financial needs.
And to meet the financial needs of your sales team, management must find the correct equation.
What is the correct financial equation?
This question has many answers. Many variables come into play. Considerations include segmenting your sales into at least two categories: institutional sales (B2B—Business to Business) and retails sales (B2C—Business to Consumer).
Institutional sales (B2B). This segment operates in a long-term relationship paradigm. Client turnover is lower and less frequent than in B2C. (Client retention is higher in B2B than B2C).
It is true that new client acquisition in B2B takes more time and effort than B2C; however, it is generally true too that newly won institutional clients will stay with you long-term. It’s a bit like a marriage: first you date, come to know your institutional client, and then after a while of building shared trust and experiences, you can get married, and enter into a very long-term commitment that feels right.
For this type of business (B2B), margins are extremely low, but volumes are high. Depending on the company strategy and market positioning, margins can be as low as 5-10 USD per million dollars. This means the margin (or pool of money) to pay the institutional sales team members based on a volume-commission is very low. But, remembering that such rewards earned will be a “permanent” commission can go a long way toward making sales people identify with and become a true part of the company (and family) long-term.
Your salesperson will earn a low part of the volume, but this will be for a very long time. So the idea is to make the salesperson understand that the real business is to acquire more clients and still find time to keep the existing ones. The overall volume, including the old and new business nurtured by your salesperson, will grow, and even if his part of the commission looks low, this commission can increase constantly. When your salesperson understands this, he will not complain. Rather, he will do his best to increase business.
Since this type of business is institutional, conflicts of interest are less likely to exist or less likely to impact your team and culture negatively, especially compared to in the B2C segment. Important too: Institutional sales tend to involve a small percentage of the overall sales team.
Retails sales (B2C): This comprises the majority and the mass of your sales, the core. This segment boasts a bigger market, more clients, and more participants. In contrast to B2B, B2C experiences a markedly high turnover rate among clients, so your team’s relationships with them are still a good asset, but with the knowledge that these relationships won’t last forever.
Drawing from the same example as before, this is like a single guy dating multiple women, offering each of them special care and treatment, but with less focused likelihood to enter into a marriage. Each woman dated will be different and special in her own way. In this paradigm applied to our work, sales efforts must focus on how to onboard each client and how to provide each client the best trading environment and facilities available, with a support team helping the sales person to provide the most customized solutions and best conditions.
This type of sales should be remunerated in a different manner than institutional sales. One possibility is that a salesperson can be paid on money he ‘brings in’ and number of accounts he brings in. An incentive structure, including caps or limits, can be applied to motivate each salesperson to rely not simply on one client who tops up the salesperson’s account. Instead, motivate your employees with structured incentives to acquire more accounts.
The bonus must be structured in a way that honors a balance between money coming in and number of accounts acquired (and/or maintained). In some cases we must also consider the “region/quality” of the lead, (it’s not the same having a lead from Switzerland or Germany than from any other country).
Here, applying a volume commission can be dangerous due to potential or likely conflict of interest between your sales staff (brokers) and their/your clients and also conflicts of interest among colleagues on the same sales team.
A basic (and significant) salary must apply as well. This basic salary must be a good one. Your compensation package cannot leave the employee’s bonus to absorb the entire remuneration because such an incentive structure can cause a killing effect between and among employees–sometimes in a obsessive way, as your employees fight each other to try to capture the most clients. In this structure, employees can easily forget or not care that the largest, over-arching, GENERAL GOAL is for the company, the family, to be profitable.
I’ve seen scenarios in which a very low basic salary is given and a very attractive commission structure, and in my opinion, this arrangement kills the teamwork spirit, limits the overall income attainable, and stifles the work atmosphere.
Of course, other combinations of emphases on basic salary, commission on ‘money in’, reward for number of accounts, and commissions on volume can be apply successfully. The optimal arrangement all depends on the culture, vision of the company, and what the employees are looking for. Having the correct formula (and knowing how can we define what is the correct one) is the job of the sales manager, management, and sometimes owners (This can depend on size of the company, its structure, and its vision.)
In any case, we must always be very mindful, intentional, and deliberate about how we, as sales managers, structure our financial incentives, and that these financial incentives are part of a much larger, holistic interest in your employees’ personal values, motivators, and desired career path. Remember that financial incentives are very important in this industry (as in many), but perhaps not as important as making sure your employees feel heard, understood, and valued.
I’d like to hear from YOU. What have you seen, experienced, read, or heard that supports or contradicts some of the thoughts shared in this column about striking the desired balance? What considerations or aspects of this conversation are we missing? Tell us.