Sales Best Practices: Conversations About Compensation

Members of Generation Y, defined as those born since the early 1980s, have earned a very specific workplace reputation. Some characteristics associated with Gen Y include a need for ongoing recognition and positive reinforcement (the result no doubt of coddling by helicopter parents), and at times unrealistic view of how quickly they should advance in their careers.

Many books have been written about managing this generation (see, “Not Everyone Gets a Trophy” for one example).

“The notion that Gen Ys want to be CEO within a year of being hired isn’t entirely untrue,” notes Kevin Gaither, VP of Inside Sales for ZipRecruiter.

Gaither has long experience building inside sales teams, which often means relying on younger recruits, often with less than five years experience out of college.

Gaither and I were talking about innovative ideas in sales compensation. I am working a paper on the topic for BIA/Kelsey’s new Sales Transformation coverage area. He brought up one example of how he designed a comp plan specifically with Gen Y salespeople in mind. The example involves a company Gaither worked for in 2010 called BetterWorks, which sold sales recognition programs. BetterWorks eventually folded, but Gaither’s case study remains interesting.

Most of the company’s inside reps were very young, many in their first sales jobs, and were tasked with forming partnerships with local merchants, who would agree to participate in the rewards program.

“Traditional comp plans are not that effective on younger sales people, those born after 1980,” Gaither said. For many Gen Y reps, recognition and advancement are at least as important as money.

“Commission is pay, not recognition, and GenY is big on recognition,” Gaither said. “They are conditioned from a young age. They want to be able to tell their parents that they got promoted six months into a job.”

So how did Gaither tap into this psychology? By designing a comp plan that delivered small promotions in rapid succession.

“If in the first three weeks new account executives produce eight new partnerships, they are promoted to ‘account executive 2,'” Gaither said. Each level increase involved a nominal increase in base pay. Gaither established about six levels account execs could achieve, with the target numbers getting higher for each level.

As Gaither notes, every comp plan has a flaw. The BetterWorks plan’s flaw was that sooner or later, account execs would hit a point where reaching the next level required unattainable¬†production. So the reps would eventually hit a ceiling and leave to find advancement elsewhere. However, in terms of generating a short term burst of deals, the plan worked.

Flaws aside, we see Gaither’s plan for motivating Gen Y account execs as a nice mini case study of using creativity to build a comp plan that is appropriate to the dynamics of a specific sales team. We’re interested in hearing your thoughts on this idea, and whether you’ve similarly looked at ways to motivate Gen Y sales execs. We will be talking more deeply about compensation plans and other elements of sales transformation/sales best practices in future blog post and Sales Transformation Briefings for BIA/Kelsey clients.

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