If you aren’t rewarding your team for the right performance, you are failing them. Sales is not for the meek, yet companies constantly worry about being fair to everyone. “He’s been here for 12 years and is a really good guy.” Guess what? Coffee is for closers!
The biggest victims of the status quo are your “A” Players. When bonus time comes and they see the guy who hit 25% of the goal get paid just for showing up, they will start looking for jobs where the peak performers make the money.
Take the following example of a democratic approach to incentive compensation from ACME. ACME has lived with the status quo for years and continues to give pay increases based on employee tenure. Worse yet, the two reps whose combined total didn’t equal one individual quota are sucking up almost a third of the compensation payouts! Some reward for being the last man standing.
The democratic comp plan will have two adverse effects:
- Reps 4 and 5 will leave soon to double their income somewhere else.
- Reps 1 and 2 will be with ACME the rest of their careers!
Let’s examine how this scenario is different in a meritocracy. ACME decides to reward its top performers for meeting and exceeding their quarterly quotas. They make a business decision to buck the status quo.
The meritocracy has three positive effects:
- The top performers make all the money.
- Reps 1 and 2 are given Performance Improvement Plans and either improve their performance or are managed out of the organization.
- The company actually saves money by paying for peak results and eliminating payouts for under performing reps.
Roger Goodell seems like a nice guy and has worked for the NFL a long time. In a business predicated on performing for the toughest critics anywhere (“the fans”), his days are numbered if there are no games on Sunday this Fall.
Do yourself and everyone in your organization a solid: Pay the people who get the job done.