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36 FEDA News & Views Although a majority of my clients are still rid- ing the wave of a very strong economy, a few of them are seeing a flattening of the growth curve. One could argue that the industries they serve are experiencing more sophisticated competi- tive pressure. While this may be a contributing factor, I would like to suggest that there is a bit of an internal complacency occurring among the sales staff. Don't get me wrong, these folks are still working at a furious pace, but I think that their efforts need to be channeled into more productive activities, i.e., bringing in new accounts and expanding the product categories being purchased by existing customers. "Captain Obvious strikes again," you might be thinking. Granted, these suggestions are not new or novel but new and novel are not the key drivers in wholesale distribution. Recycle and refine might be better descriptions of how our segment functions. In this vein, I would like to give you some thoughts that have been domi- nating my private client coaching as of late. We can all agree that new accounts are the lifeblood of an organization due to the inev- itable. We will lose several accounts due to natural attrition, competitive pressure and just plain firing customers. The latter is fairly rare in most organizations. Adding new accounts must be an integral part of the sales strategy. In times of prosperity, this is often overlooked in favor of servicing existing business. As the economy cools, those who have failed to add accounts will find themselves at the mercy of their exist- ing base. Over my 30 years of experience, I have seen a couple of these valleys. Putting too few eggs in the basket has proven to be a very scary proposition. Renewed focus on new-account generation often comes down to financial motivation. Many of my contemporaries find sales management and motivation to be a pain in the backside to say the least. Yes, salespeople can have a ten- dency to buck conformity and often have a highly- excitable nature, but that is what makes them so great. They are the tornado that spins the turbine. Without this highly charged presence, we would be dead in the water. Directing this force of nature can often be achieved by modi- fying their financial compensation to better align with organizational goals. In other words, grab them by the wallet and tell them what you want them to do. A Two-Pronged Approach By Jason Bader jason@distributionteam.com continued on page 38 The Right Compensation Plan Can be a Great Motivator A couple of years ago, a client of mine was struggling with new-account generation. His sales team was spending a great deal of time servicing accounts rather than looking for new business. In fact, the team was over-servicing accounts by tak- ing orders, delivering and sourcing product for their custom- ers. These were all activities that should have been delegated to the internal operating team. My client was frustrated that his investment in vehicles, technology and internal staff train- ing was not being fully utilized. Telling the outside sales team to change their behavior fell on deaf ears. In order to get their full attention, he proposed a radical shift in their variable compensation plan. In this new plan, the commission on a new account would receive a high commission for a period of 12 months. After the 12 months, the commission would be reduced to a more mod- est percentage. The theory behind the timing was fairly simple. In the early part of the relationship with a new account, the outside salesperson would need to spend a great deal of time understanding the company, managing service expectations and driving product category participation. After 12 months, the new account should be well-versed in the service and product offering, and the majority of account servicing should have been transferred to the internal operating machine. To provoke a change in behavior, the spread between the two commission rates had to be significant. The new account commission was 25 percent of the gross profit, and was reduced to 10 percent after the 12-month period. I understand that these are fairly large percentages and you should adjust to better fit your environment. As expected, there was the usual grumbling by the team, which is common with any compensation change. Fortunately, the program has had the desired effect. The transformation was slow but his salespeople eventually changed their focus. Although, I must admit that we were both confused by the slow conversion. In the end, however, it has resulted in more customer credit applications. The Other Part of the Equation As I mentioned at the beginning of the article, I see the change in compensation as part of the overall strategy to drive sales. As any good sales professional knows, it's easier to expand sales with existing customers instead of acquiring new accounts. Hence, the bump in pay for the more challenging strategy. Driving deeper sales is more of a technology discus- sion than a behavior modification exercise. Reporting is the key to discovering opportunities in the existing account base. I've written on this before, so I won't go into lengthy detail this time. Essentially, the company must mine the data trapped