Today, you will learn about an interesting concept about eradicating commission as part of the business model. Say what? Okay, hold your horses now. Our guest today has a pretty interesting perspective on eradicating commissions that you might want to tune into, plus more!
Justin Roff-Marsh is the Founder and President of Ballistix, a sales management and marketing consultancy where they build sales functions for organizations either from scratch or go into organizations and re-engineer their sales environment to look more like a production environment. Serving clients in the US, Australia, and the UK, they’ve worked with clients across these three continents over the last 20 years.
Here are the highlights of my conversation with Justin:
The use of the word “process” in the formal sense:
Most organizations do not have a process but a bunch of people running around trying to sell stuff.
Core components of a successful sales environment:
- Start at the end, work backwards.
Figure out what activities generate sales and the various activities that contribute to sales which make the bigger contribution.
- Meaningful, selling conversations/interactions
These are the primary drivers of sales volumes. For field sales, the primary driver is the number of times of face-to-face conversations with potential customers. For telephone sales, the driver force is the volume of telephone selling conversations with prospects.
- Division of labor
To have people focus on selling, they have moved activities to customer service and engineering handling the following areas:
- Looking after existing accounts
- Processing repeat transactions
- Generating proposals and quotes
- Handling issues
This takes away 60% of their work
- Prospecting and lead generation
- Categorized under their Promotions subset of marketing
- Promotions team generating almost 100% of the opportunities salespeople are prospecting
The repercussions of outsourcing your prospecting:
- Economic incentive for both organization and provider to come up with a quick fix
- It’s unproductive, you turn to telemarketers and the organization gets dissatisfied with the quality of sales opportunities generated
- Provider works away from the work due to costly staff turnover
- Incentives are wrong if you outsource this to someone else
- Organizations have to figure out how to do this themselves
The idea behind doing away with commissions:
- Figure out what people are worth and pay them their market value.
- If you pay people on a piece rate, they end up competing with one another and the process ends up tearing itself apart.
- Fosters division of labor and team-based approach selling
Justin’s Major Takeaway:
Read Justin’s book, The Machine: A Radical Approach to the Design of the Sales Function
Eliminating commission is a consequence of applying division of labor itself, not as a primary.
If all you want is incremental improvements, take 1-2 ideas from them but if you’re looking at sales and recognizing that you can’t achieve your growth objectives for the organization by scaling your sales function in its current form, then stop looking for worn-off fixes and read the book.
Get in touch with Justin through his blog at www.salesprocessengineering.net.
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