How to incentivize sustainable selling?

(2 minutes read)

There are two types of management styles for sustainable selling: Management by objectives and management by values. And it is the second one, which brings companies mid-and long-term success and resilience. (To read more about sustainable sales management, please click here)

However, it is not that easy to set a bonus system for management by values, and it requires setting “deep” objectives attached to the company’s values, vision, and purpose. Doing so requires three elements: Direction (concept, sense), safety (right to fail), and order (a transparent bonus scheme)

If we take the example of the salesperson in a men’s wear store from the “sustainable selling” post, the “management by objectives” approach would be to pay the bonuses based on the monthly revenue generated by the salesperson, no matter how they sell. That is the easy approach that follows the idea of Jack Daly, who says, “what gets measured gets done.”

Management by values approach, on the other hand, would require:

Deep consideration of the sales objectives. What the success would look like? How would we like to sell? Do we want to sell even if we know that it is not the right purchase for the customer? Do we push customers to buy additional accessories each time? How do we manipulate our customers? How much do we care?
It is choosing the right metrics. If it is only sales, the salespeople will put all their energy into generating the highest sales no matter what happens.
Clarity: The way we measure success must be clearly defined
Skin in the game. The designer of the incentive plan must participate in the pleasure of the upside and pain of the downside.

We can find a great example in the famous book of Simon Sinek, Bridgeport Financial (Simon Sinek, Start with Why, Penguin Business 2009). In the cash collecting business, Christina Harbridge realized that when given the objective as the amount of collected cash, even “nice agents” were becoming very passive-aggressive on the phone with debtors. And this attitude was against her value of respect. In order to change this disappointing consequence, she decided to incentivize the deep objective, which was “everyone has a story and deserves to be listened to” The goal during the conversation to learn the maximum information from the debtor regarding their particular situation and their capacity and capability to pay their debt. So she decided to pay the bonuses based on the number of thank you cards her agents send out instead of the amount of money they collected.

As a result, Bridgeport Financial collected 300 percent more than the industry average. Moreover, she started to do business with people and companies that Bridgeport agents have pursued.

However, there are some points to watch out when setting “management by value” systems:

Avoid the McNamara Fallacy – never choose metrics based on what is easily measurable over what is meaningful.
According to Jerry Z. Muller (Muller Jerry Z. (2018). The Tyranny of Metrics. Princeton University Press. ) when a measure becomes a target, it ceases to be a good measure. For example, if you measure the customer retention rate only, the salespeople might lose interest in the new customers.
Money is a legitimate measurement of goods sold for services rendered. But it is no calculation of value. Just because somebody makes a lot of money does not mean that he necessarily provide a lot of weight. Simply measuring the number of goods sold or the money brought in is no indication of value.

And all those drawbacks are avoidable if you have a deep cause of being in the business beyond profit-making, a clear purpose.