To motivate a team well, it is not enough to just stay on paper. Managers and employees need to work together to make the weak powerful and the powerful move forward.
1. Motivation coefficient: How to distribute bonuses to make the sales team as fierce as wolves
Using commission to motivate the team to do marketing, of course there is a problem if the commission ratio is too low, and it is even more problematic if it is too high. What should we do? Design an effective “motivation coefficient” and deduce the appropriate “commission ratio”. What really motivates employees is a feeling. This feeling does not come from the commission itself, but from the ratio of the commission to the anchor point, that is, the basic income. This ratio is the “motivation coefficient”.
Case 10-21
Xiao Li used to work in a famous Internet company and researched artificial intelligence. A few months ago, he quit his job to start a business, using facial recognition technology to help clothing stores identify customers entering the door, match them with photos on social networks, identify customers’ clothing preferences, and recommend products in a targeted manner. As soon as this product was developed, it was sought after by investors. In order to promote it as soon as possible, Xiao Li plans to recruit a sales team to develop customers. So the question is: how to motivate sales staff to turn them into a team of tigers and wolves?
Xiao Li hated the complicated management system of his former employer and decided to use the simplest and crudest management method: take sales commissions in proportion to the sales amount! However, “taking sales commissions in proportion” sounds simple, but how to determine this “proportion” is not simple. If the commission ratio is set too low, it is estimated that it will not motivate sales staff; if it is set too high, it will be too easy to make money and will make everyone lazy. What to do?
Xiao Li did not dare to be careless and decided to ask a friend who does management consulting. After listening, the friend said: “Sales amount x commission ratio = commission amount”. Which of the three variables here should be determined first? Xiao Li said of course it is the commission ratio, which represents the company’s clear and irrevocable promise to the sales team to share money. This promise of “sharing money first, then making money” will motivate the sales team to work hard for their own calculable interests.
The friend said: Wrong. This is a misunderstanding of “motivation”. What really motivates the sales team is the “strength of motivation” when they finally get the real money, not the “high or low commission ratio”.
For example, for a salesperson with a basic income of 5,000 yuan, how much commission will he get in the end to feel more motivated? 100 yuan? He will not refuse it, but he will not work extra hard for this 100 yuan. If you can get 5,000 yuan without working hard, and you can only get 100 yuan more by working hard, then don’t work hard, save some energy and do a part-time job, maybe you can earn more. What about 2,000 yuan? I feel excited; 5,000 yuan? Like a wolf and a tiger; 10,000 yuan?
However, can giving 5,000 yuan make people with a basic income of 50,000 yuan like a wolf and a tiger? Of course not. The “strength of motivation” has an “anchor point”, which is the basic income. The higher the commission is relative to this anchor point, the stronger the feeling of being motivated. We call this ratio the “motivation coefficient”. When designing an incentive plan, the first thing to determine is the “incentive coefficient” rather than the “commission ratio”. The more entrepreneurial the team is, the more it needs a team of tigers and wolves, and the higher the “incentive coefficient” should be, such as 100%.
Xiao Li suddenly realized and decided to set the “incentive coefficient” to 100%. The average base salary of sales staff in this industry is 5,000 yuan. This means that a truly hard-working salesperson should also get an average “commission amount” of 5,000 yuan per month. A hard-working salesperson should sell 5 systems per month on average, with a sales amount of 50,000 yuan. The commission amount of 5,000 yuan, relative to the sales amount of 50,000 yuan, is calculated to be 10%.
Then, Xiao Li recruited sales staff with a commission ratio of 10%, and soon formed a “wolf-like” team. In two or three months, the sales amount has achieved rapid growth. This is the power of the “incentive coefficient” based on the “anchor point”.
So, can the logic of this “incentive coefficient” be used in more scenarios?
If you want to dig a core backbone from a competitor company, how much money can you give to dig it? “How much money” is not important, the growth rate of the money you give relative to his original income, that is, the “incentive coefficient”, is really important. 20%? It’s difficult; 50%? It can basically succeed; 100%? Almost invincible.
When the company transforms, should it use new people or old people? Use new people, because their “anchor point” is low. They are more likely to be constantly motivated by small victories.
More and less, big and small, good and bad, are all relative concepts. Everyone has a line in his heart. No matter how hard you work, only when you cross this line will he think you are good to him.
2. “Profit commission system” based on “incentive compatibility”
Because a reasonable “incentive coefficient” is set, the team is like a wolf and a tiger, and sales soared. But one day Xiao Li suddenly discovered that the company’s loss rate was also soaring. He was shocked and quickly investigated. He found that the sales staff sold the system at a very low discount in order to sell it well. In this way, they got a generous commission, and the company was bleeding rapidly. Xiao Li collapsed and thought: What should I do?
Reclaim the discount rights from the sales team? No. This artificial intelligence system is not a well-known brand. Not giving discounts will greatly increase the difficulty of sales and give competitors an opportunity. Then not paying commissions? Even worse. Commissions are the “breath of true energy” of the sales team and cannot be dispersed.
What should I do?
Xiao Li called a friend who does management consulting for advice. After listening, the friend said: You try to change the “income commission system” to the “profit commission system”. Under the “income commission system”, the sales team will evaluate the two sales models of “high price and small quantity” and “low price and large quantity”, and it is very likely that because of the fear of sales difficulty, they will choose the “low price and large quantity” model and sell the system to the bottom line. In this way, they can still get commissions, but the company will lose money.
So what is the “profit commission system”? Xiao Li’s artificial intelligence system has a rigid cost of 6,000 yuan, including cameras, transportation fees, and installation fees. The market price is 10,000 yuan, of which 4,000 yuan is gross profit. Revenue-cost=profit. Try changing the calculation method of commission from 10% of revenue to 50% of profit. If the salesperson can sell the product without discounts, the profit is 4,000 yuan, and his commission is 2,000 yuan. What if he gives a discount of 1,000 yuan? The profit becomes 3,000 yuan, and his commission becomes 1,500 yuan. If the discount is large and the commission is small, will the salesperson feel distressed? This is the “profit commission system”, which not only maintains the flexibility of discounts, but also encourages salespeople to exchange orders without discounts as much as possible.
Xiao Li immediately convened a meeting of the sales team and changed the “revenue commission system” to the “profit commission system”. After 1 to 2 months of running-in, the company’s revenue and profits are back on track. This facial recognition system has also been recognized by more and more customers.
Why can the “profit commission system” solve the heavy bleeding caused by the “income commission system”? Because the “profit commission system” is a system that is more in line with the principle of “incentive compatibility”. Simply put, incentive compatibility is the common driving force for everyone to benefit from the correct mechanism. The income commission system will inevitably lead to sales staff ignoring costs. The basic logic of company operations is: income minus cost = profit. Sales staff want income, and companies want profits, so both sides will fight wits and courage on costs and play back and forth. The profit commission system actually adjusts the goals of sales staff and companies to the same: profit. And profit = income-cost. From then on, in addition to paying attention to income, sales must also start to pay attention to costs and use as few discounts as possible, because these are all related to their own interests.
So, how can this “profit commission system” based on “incentive compatibility” be used in more scenarios?
Suppliers want to sell energy-saving lamps to brightly lit shopping malls, but it is difficult. Why? Because of “incompatible incentives”: suppliers want shopping malls to spend more, and shopping malls want suppliers to charge less. You can try to change the charging model to a “profit commission system.” How much electricity does a shopping mall use a year? 2 million yuan? We can help you replace all of them with energy-saving lamps for free. The electricity bills saved in the next three years are our common “profits.” I only want 20%, and the rest is yours. The suppliers and shopping malls are “incentively compatible”, and the profits may be considerable.
Sometimes, when we shout to our employees, “We must have a spirit of collectivism, a sense of ownership, keep a long-term view, and focus on the overall situation,” it may simply be because you lack a system that is “incentively compatible” with your employees. The same goes for family and friends. The “profit commission system” can change the attitudes of employees and even partners towards costs and help you achieve a state of “incentive compatibility.”