Randy Illig Interviews Shawn Donovan on Building an Effective Sales Organization: Part 2
Shawn Donovan is maybe the most successful sales expert I know. He was the chief sales officer at Neustar, Fiserv, and Acxiom, and president of sales at EDS, pushing each to record highs in sales. He retired, for now, in December, after 30 years at the top of these sales empires and didn’t miss an annual sales goal very often! In this exclusive Q&A, the respected sales guru shares his secrets about what it takes for chief sales officers to whip a place into shape. He’s a friend and a client, and it is a privilege to spend a little time with him on this subject.
Q: When you say people need to be held accountable and people need to be incentivized, can you talk about what that looks like?
A: Evaluating the effectiveness of compensation and recognition plans is a key part of my playbook and a priority. It’s essential to know if the plans align with the corporate priorities and incent the desired outcomes. For example, a recognition initiative I take from company to company is the Top Performer Forum. When I land, I'll evaluate who the top performers were from the prior year. I’ve established a set of criteria other than just performance in order to measure their intangibles, such as leadership. The purpose of the Top Performer Forum is to engage the best to assist in setting the corporate growth agenda while recognizing their contributions. We openly discuss what's working and what's not working, and then I work what I hear into my assessment. I always evaluate the existing compensation plan against market and my philosophies and adjust accordingly. Of course, creating a winnable game and quotas for the organization and individuals has to be aligned with the compensation philosophy and plan.
Q: Are there other things like the quotas that should be considered?
A: Quota planning is part of the process. My last company is a great example. The company has been around for a number of years. Their sales organization has never made its annual sales plan. Never. Ever. That's almost impossible. When you evaluate why they didn't, it was always the finance organization establishing the quota. Purposely, they may have set a stretch goal because it really didn't matter to the company if they met or exceeded plan, as long as they got close. However, you have to worry about the morale of an organization. Never making plan took a toll on the organization.
It’s important to create a winnable game for the organization and individuals. The winnable game also has to move the company forward from a growth perspective. If you don’t get the quota-setting process right, then you end up having to overpay to retain the talent.
Q: Can we get into compensation for salespeople? Do you have any good rules of thumb? Also, as a company grows, does comp change for early-stage companies versus later stage?
A: Let me answer the last part first. I don't think you should change compensation with the growth tides of the company. It’s more important to align with the corporate priorities. Because what are you going to do when the company's not experiencing growth? Are you going to then take the compensation plan in a different direction, which would probably be viewed negatively? I don't think you want to do that.
In my opinion, you have to evaluate what your competitors are doing around compensation. You have to evaluate what the industry and market is doing around compensation. What are the established best practices? You can execute an assessment using your internal HR organization. If that’s not an option, then you're going to have to engage a consultant to help you assess what's competitive in the market.
I like to compensate above market, and I make that very clear when I come into a company. I do that for one reason. I want to make sure I can retain my top talent, and I want to make sure I can recruit top talent. Establishing a compensation philosophy and plan framework is essential. You don’t want your organization guessing from year to year. Set expectations. Adjust when required.
Q: Have you seen companies where they were overcompensating and therefore the company was sucking wind because a lot of their gross profit was going to sales and not the rest of the company?
A: Yes. My last company was in that very situation. They were over-paying for under-performance. However, they had to in order to retain their people. Remember they had never met or exceeded their sales plan. After completing a sales compensation assessment, I adjusted the compensation plans to more closely align with market. This needed to be done but was only an option if we realigned the sales plan. Create a winnable game. I always tie compensation to quota achievement. That's my philosophy. So it’s important to get quota right. It’s then important to annually re-evaluate sales performance, corporate priorities, and any potential changes/impact to the compensation plans.
Q: Are you talking about different commissions if you meet a quota or don't meet a quota or exceed quota? Would you have three tiers for compensation?
A: Yes. My philosophy is pay and recognize for performance.
Q: How much of a margin between high and low do you recommend to incentivize appropriately?
A: Let me answer this a little differently than how I think you asked the question. It really depends on the situation. You have to pick a baseline. Let's say 70 or 75 percent of quota. I suggest paying a certain percentage up to 75 percent of quota. Then pay an incremental percentage more between 75 and 100 percent of quota. And then pay an incremental percentage more above 100 percent. I like creating tiers so that you're always incenting your sales team to get to the next level of performance.
It’s also important to be transparent and communicate your philosophy. I'm going to pay our top performers the most. If you're just getting up to 75 percent, you're going to make less and you're not going to be happy. And I don’t want you to be happy. So you have a choice. Choose to improve, work on your skills and competencies, and practice your profession in order to move up into the higher tiers. Or you're going to be looking for a job, either on your own or I'm going to performance-manage you out of the company.
Q: Is there training that gets people up from 75 percent or sub-75 to get the job done?
A: Unfortunately, companies don't invest in developing their employees’ skills and competencies much anymore. I insist on investing in training. And when I say invest in training, I mean enhancing skills and their competencies to improve results and make people more marketable. Then it’s my job to retain them. You can start weeding those out that show no interest in getting better and focus on the people that want to get better, that want to improve.
Q: I think the point here is when you invest, a couple of things happen. One is that a rising tide lifts all boats, so everybody gets better. Secondly, the people that you want to retain, you're able to retain, because they see you investing. And third, you become a destination employer. Is that fair?
A: Yes, absolutely. And we all know there’s a cost to replacing an employee and it's significant, not just in dollars but in time. So, you want to give that employee every opportunity to improve. And once they demonstrate that either they can, or they can't, then it's an easy decision on what’s next. My experience has been that most people are dying to get better and they just haven't been coached and mentored appropriately, which is why competent, capable leadership is critical.
Q: When you think about your career to date, what would you say are the one or two biggest learnings that you'd pass on to others?
A: I’ve had many learnings. You have to have a growth agenda and plan. If you don't, you're not going to be successful. You have to push that plan with the CEO and board. And as I said, always strive to get better. You can't get complacent. You have to create the wave; you can't ride the wave. And don't compromise your agenda or plan, because, at the end of the day, the CEO and the board won't compromise when it comes time to hold you accountable for results.
Also, if you're looking for a new opportunity, do your research beforehand. Study the company, look at the leadership team, look at the mission, and look at the values before you accept a new CSO/CRO role.
The other thing I would pay attention to is sales reporting trends—for example, the pipeline. One of the biggest failures I had in the last 10 years—and I haven't had many of them—was with Fiserv. I was with them for five years and had record sales every year except one year. I was analyzing the trending of the pipeline, and I was concerned. However, I thought we could recover. We never did. There were internal and external reasons, but the fact is we failed. The trends generally don't lie, and just because the prior year was good doesn’t mean that this year’s results are going to be good. You can't trust that that's going to happen. You have to be able to act on it.
Read the first half of the interview here.
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