The saying “compensation drives behavior” is one of the first things I heard a sales manager say. I’ve also heard this mentioned over and over again within sales. And in many cases, it’s true. You will often see sales compensation and strategic decisions made based on this one idea. For the most part, you’ll find that business leaders agree with this statement (with some exceptions).
However, there is still a raging debate on how far it’s acceptable to pay for behavior. A great example is, “If compensation drives behavior, we should tie compensation to sales reps updating CRM.” When you start applying the statement broadly, it also leads to a very negative attitude within sales, for example. “Well, if you want us to do that, then we should be compensated for that.” This is a very entertaining debate, and if you ever want to have some fun at a sales conference (late at night in the bar, preferably), toss one of those logic bombs out there, and watch the fireworks.
My desire is not to debate or make a worn out point. I want to expand it. I don’t believe you can apply this idea to everything, but I do think we should use it for more things.
Let me make the point by sharing a quick personal story. A few years ago I spoiled my kids and bought them iPads. At that time, our family had five iPads, which could seem excessive, and I guess it is. As I’m sure you have experienced in your own home, power cords and chargers get misplaced easily, especially when dealing with pre-teen and teen children. The automatic reaction is to grab the first replacement you can find, even if it’s in your brother’s room. My family is no exception.
Well, this weekend my kids had somehow found a way to “lose” all five of our chargers.
You can imagine my frustration that Saturday morning when I realized I could not find even “MY” charger. I called an immediate family meeting with the kids (my wife stayed out of this train wreck), and insisted that nothing would happen that morning until I had all five chargers. Then my kids went off to find the chargers. As much as I demanded they get moving, they didn’t try very hard. They got distracted. After 20 minutes of looking, they had only found one.
At that moment, it struck me that compensation drives behavior. I called for an immediate regroup. “Kids, I’m giving you 10 minutes. If you bring a charger and cable to the kitchen in the next 10 minutes, you’ll get a dollar for each one.” You can imagine what happened.
And if you look closely at the image, you can see SIX chargers, plus an iPhone charger (I didn’t pay out for that one)! Not only did I get all five. I got an additional charger that a neighbor kid had left at our house. The best part is, I got it all in 5 minutes.
Apparently, the compensation drove the behavior, but you will notice a bonus. I made the reward time sensitive. The kids only had 10 minutes to find the chargers. When the time ran out, the offer disappeared (an apparent sales trick, but hey, it worked on them).
How powerful could the idea of compensation drives behavior be in other areas of your organization outside of sales? More importantly, how far could you push this concept to improve company performance before it does not have the desired effect, or has the baggage we see in sales?
At companies I have helped in the past, we have expanded the idea of CDB (Compensation Drives Behavior) outside of sales. They have seen a significant, measurable, and positive effect. I can’t predict with certainty that it will work for you, but I would strongly encourage you to consider it in your own organization. From the CEO down to the line manager, look for ways to apply this principle.
For the skeptics out there, think about what it will honestly cost you. If you don’t have “At Risk Pay” today, introduce it in a small way and measure the results. If you see positive movement, even the most conservative of managers or financial controllers will be willing to give your second program the green light. If you start small and, for whatever reason, the program doesn’t, you risk very little.
As a capitalist society, we pay sales for performance because it works. Experiment. You might find that other areas of your business react positively. I know my kids do!