CJNg _ 2.jpgHi!


    My name is c.j., your trusted Sales Advisor, and here's the February 2009 issue of Psyche-Selling TM eNewsletter. 


    About 50,000 jobs were lost globally in just one week in January.  Even profitable companies such as Microsoft and SAP are cutting 5,000 and 3,000 jobs respectively.  Yet, we have not reached the worst part of this downturn, and there may be further job losses to come in the near future. 


    If there's one remaining hope to salvage some jobs and reduce the flood of layoffs, it's NOT going to be China.  Rather, it may just be your sales force.  No we don't expect your sales force to turn things around in such difficult market conditions.  However, we do believe that there is a lot more that your sales force can do to save some jobs if they have the right attitude, motivation, skill-sets and yes, incentives.


         Hence, this month's topics:

  1. Re-Configuring of your Sales Incentive Plan; and

  2. How NOT to Write a Layoff Memo


    This issue's main article is on  "Re-Configuring your Sales Incentive Plan", and it will tell you why this is probably the best time to adjust your sales force's incentive plan, so that they are much more aligned to your strategic goals.


    In brief:

  • Most sales people are paid to generate short-term sales, but are not paid to spend time developing new and strategic businesses that will bring profitable sales in turbulent times;

  • As a result, many sales forces find themselves caught in severe price competition and shrinking sales orders, as they did not develop enough new businesses that will make up for the fall in demand;

  • Given the current tough economic times, it is a great opportunity for management to re-look at current sales incentives, and device ways to motivate sales people to achieve strategic sales goals.


    To read the rest of this newsletter, pls. click here (http://www.psycheselling.com/page4.html).


Re-Configuring your Sales Incentive Plan


by c.j. Ng


     It is said that the sales person's mind works faster and more accurate than a super-computer when it comes to calculating their incentive payments.  They know how to reach their targets and optimise their pay by taking the most efficient of all actions.


     Yet, despite all the incentives that companies give their sales people, there are still some chronic problems faced by most sales forces, such as:

  • Selling low margin items and foregoing higher margin ones, since it's easier and a lot faster to sell;

  • Pushing products rather than providing solutions that will deliver long-term benefits to customers;

  • Selling to the same customers and not doing enough to develop new ones;

  • Communicating with the same, singular contact in the customer's organisation most of the time, and not taking the initiative to develop more relationships with more people;

  • Making lots of customer visits that eventually produce little results etc


     While a lot of training has been conducted to enable sales people overcome the above issues, their behaviour still remains very much the same.  Now that we are all in economic winter, budgets and time for sales training are likely to be slashed further. 


     In any case, having the right training for your sales force is just part of your solution towards better sales performance.  Giving your sales people the right incentives so that they are focused on doing the right things may be more important than the training itself.

What Gets Paid Gets Done

Here are some common ways how sales people are paid for their efforts:

  1. Commission based on a percentage of the sales revenue;

  2. Bonus based on the achievement of a pre-determined annual sales target (based on sales revenue);

  3. Profit -sharing based on gross profits or sales margins; etc.


     Of the 3 common ways, 1 and 2 are the most common, while some companies are beginning to focus on achieving good margins in addition to sales revenue.  Still, sales people are rewarded by the dollars-and-cents that they bring in, rather than on how they can develop sustainable "pipelines" that will provide revenue in the future, and are also less prone to vicious price competition.


     Here's a simple example.  Imagine that you work for a company that sells computers to other companies.  You sell both desktop computers as well as servers.  While the margins for desktop computers are getting thinner by the day, if your customers identify with your brand, they will tend to buy from you.  Even if they may haggle some discounts from you, but the sale is relatively easy.


     However, selling servers are a little more complicated.  You will need to find out more technical details about your customers' requirements, and customers are also quite particular about how your product performs, as well as the after-sale maintenance agreements.  While servers are comparatively less prone to severe price competition (than desktop computers), it may take twice as long for you to make the same amount of incentive pay selling servers than selling desktop computers.


      Hence, it's going to be a no-brainer for you to keep focused selling desktop computers than selling servers, even if your company needs to establish itself as a major seller of high-quality and high-performance servers.


     To incentivise sales people to sell more of the difficult products (or to difficult target customers), come companies provide "spiff" for the hard sale, i.e. additional bonus or commission to sell the hard-to-sell stuff.  but this may or may not work for you, especially in hard times.


     In the real world, things can be a lot more complex, e.g.:

  • Some solutions are so complex that you will require the efforts of your engineers or technical colleagues to help evaluate customer needs and draft proposals.  As such group incentives may be needed;

  • Some existing customers are simply not going to give you significant re-orders in the near future, and customer service staff may be called to do the servicing of customers via phone and online means, and close the small deals as well.  You will only be paid if you or your customer service colleague identifies some new buying needs from your customer, and you helped close the new deal.  And you will get the bigger share of the group (you and your customer service colleague)  incentive for the new deal;

  • Sometimes it may take months if not years to develop new customers, or to get other departments in your existing customers to buy new solutions from you.  If you are not compensated for the months of hardwork (which may or may not lead to anything), you won't invest in the time and energies in it, etc.


     Given the tough economic times where companies will want to reduce (sales) costs and still motivate your sales people to sell the hard-to-sell stuff, here are some broad suggestions:

  • If your sales people are still pretty much selling the same stuff (low margin products or dealing with the same customers or pushing products instead of providing solutions), instead of paying them the full commission or bonus, pay them half the amount instead.

  • If your sales people (and non-sales staff too) went through thick and thin to get the hard sales, pay them the full commission or bonus (but pay them as a group is it's a group offer).

  • If you keep track of the progress of your sales people working their "pipelines" to develop new customers, AND you don't have the budget to reward "effort" only, give sincere praise and recognition in your weekly, monthly or annual sales meetings.  Who says incentives must always be monetary-based?


Compensating Sales Managers

Traditionally, sales managers are paid:

  1. Either by a direct over-ride on the sales achieved by her team;

  2. Or with a bonus upon achieving or exceeding the team's annual sales targets


     Given the changes in the sales team's incentives mentioned above, sales managers' compensation would have to be modified a little as well, for best results.


     If sales people are no longer paid according to just the amount of sales they bring in, then managers should also have more sophisticated ways measuring (and paying) for performance.  Besides sales turnover, sales managers can be measured by a combination of 2-3 criteria, which may include:

  • Sales turnover/ gross revenue;

  • Maintaining a certain level of margins;

  • Sales of products or solutions that are strategic to the company; or

  • Acquisition of new customers that are strategic to achieving future targets


     The above criteria can be measured as sumation of separate factors, i.e. the manager can be paid x amount for achieving 100% of targets and y amount for achieving 80% of 30% margins.  Or they can be paid in a martrix mode where if both or all criteria do not hit 100%, they will not get 100% of their bonus.  Conversely, if both or all criteria exceed 100%, they will receive exponential rewards, to motivate them further. 


     In  an case, there should not be too many criteria to measure and compensate sales people or managers, or they may be confused as to exactly what their company wants them to do.  Having three criteria will be a good number to work on.


Getting Them to Buy-in


     Expect most if not all members of the sales team being upset when management wants to tinker with their incentives-scheme.  For all you may know, some sales people, especially the better ones, have already make plans on how they should spend their commissions and bonuses if they work according to the existing plan.  Some may have even borrowed (heavily) against future earnings.


     However, if there is a need to re-focus and re-align the sales force's performance to your strategic goals (especially in such unpredictable and turbulent times), then you may have to find ways to win their support.


     One thing to avoid is to announce the plan abruptly, and force your sales people to accept it.  That is almost a guaranteed way to lose your best sales people immediately.


     The other thing to avoid is, in the event that you do lose some of your good sales people, you chickened-out and revert to your old plan.  Your remaining sales people may have already be accustomed to the new plan by now, and a revert to the old plan will cause more confusion, and you will soon lose those sales people who may actually succeed with the new plan.  In any case, if those sales people that you lost initially are really good, they will not be re-joining you any time soon.  So a reversion of the plans may make management feel good, but in reality will do a lot more harm without any good.


     If you feel there is a need to re-configure your sales incentive plan, here are some suggestions on how to get acceptance and support from your sales force:

  • Tell your people the issues and challenges that your company is facing right now, and that a new incentive plan is required to make the company and its sales force more competitive;

  • Appeal to noble motives.  E,g, you can tell your sales force that if nothing is done, more jobs will be lost (and NOT that management will have lower bonuses);

  • Pro-actively get feedback and inputs from your sales force about their new incentive plan.  Not that you'll want to accomdate to all requests, but in doing so, your people will feel that their voices are heard.  Besides, you may get some great ideas too;

  • If there are heavy resistance from some sectors, you can implement the new plan as a pilot on those teams who are most likely to succeed first.  That will give you credilbility and momentum to push forward your reforms;

  • Understand that your incentive plan is just part (although a very important part) of how you can get better performance from your sales force, and you will need better training, hiring and leadership for your sales force if they were to scale to greater heights;

  • Understand that no matter how hard you tried, there will be people unhappy with your new plan.  There may be some good people who will leave no matter what you do.


     Ultimately, there will be risk in making any changes, and changing sale incentive plans definitely belongs to the higher risk category.  That's probably why many sales incentive plans are way out-of-date and do not align sales performance to the company's sales strategy.  However, give such turbulent times that we are in right now, it may just be a good reality check for sales people to understand that it's time they make the necessary changes for the greater good, as well as to make them better sales people for the future.


     To discuss more about how your sales incentives should be, please e-mail info@directions-consulting.com or call +86-136 7190 2505 or Skype: cydj001 and arrange to buy me a mocha.  All information shall be kept in confidence.

Power Breakfast Hour: 17 March 2009

Re-Configuring Your Sales Incentive Plan


     Join International Sales Leadership and Performance Coach c.j. Ng in this breakfast meeting in Shanghai where he will be sharing with you the following insights:

  • How to review your sales incentive plans to see if they need to be re-aligned to suit today's needs;
  • How to adapt your sales incentives given a smaller budget and higher demand for your sales force to perform better; and
  • How to get buy-in from your sales force should you intend to make changes to their incentives

VENUE: Le Equilles Restaurant, Ground Floor, Xin Jin Qiao Plaza, 23 Beijing West Road (by Xizang Middle Road), Shanghai.  Pls. enter via Citadines Apart'Hotel at 55 Beijing West Road.

DATE: Tuesday, 17 March 2009


TIME: from 08:00 a.m. - 09:00 a.m.

PRICE: Just Pay for your Own Breakfast (RMB 45 only!)

     To make this a more conducive discussion, we are expecting a small group of about 15 people only. The room can only take in 18, so please register early to avoid disappointments. Please e-mail your registrations to sales@directions-consulting.com

      Pls. check out our web sites www.directions-consulting.com and www.psycheselling.com/page4.html for more inspiration.

Practical Tips for Hiring Managers:
How NOT to Write a Layoff Memo

by Mark Murphy, CEO of Leadership IQ

The following layoff memo is real (it was written by the CEO of one of the world's largest magazine publishers). It's no worse than most layoff memos (it's actually pretty typical), but it is a wonderful example of how NOT to write a memo that announces layoffs:

As you all know, the past year has been a time of transition at ABC Publisher. While we continue to invest in our core magazines, we are also focused on transforming our workforce and broadening our digital capabilities in order to become a truly multi-platform publisher.

We've made a lot of progress. Many of our web sites have matured into strong and popular brand vehicles, while others are relaunching new designs with fresher content. Meanwhile, our magazines continue to be some of the most popular and relevant titles on the newsstand today.

But progress brings change and we need to continue to evolve to meet the cost pressures and challenges presented by our rapidly-shifting industry.

Today I need to share with all of you that we are announcing layoffs throughout the organization.

These layoffs, which are in several business areas and on both the edit and publishing sides of a number of titles, are part of a restructuring necessary to sustain our progress.

You will continue to hear much speculation about our company in the press, so I encourage you to stay focused. I know this is a difficult time for all of us it's never easy to see talented colleagues leave.

Difficult times also bring opportunity, and I believe we have enormous potential for innovation and growth. I speak for the entire management team when I say we appreciate your hard work and dedication.

There are dozens of problems with this memo, but let me highlight four. (Get all the tools and techniques you need at our upcoming teleconference Managing Layoffs Without Destroying Your Culture.)

First, this memo takes 4 paragraphs before it actually says there are going to be layoffs. And the paragraphs that precede the layoff announcement are completely at odds with bad news. In fact, I'd be pretty excited to hear about all this wonderful progress we've made. So just as I'm feeling good about our progress, fresh content, digital evolution, etc. BLAM, I get hit with the layoff news. Wow, that's nice. Get me all excited about how great we're doing and then tell me how I'm not going to be a part of it.

Of course, in today's jaded age, most employees are pretty skeptical of memos that start with all that vacuous fuzzy stuff. So they're reading it just looking for the BUT (as in, we're doing great BUT we're chopping our workforce). So when they get to the tough message, all they're thinking is "what a coward that CEO is for not having the guts to just tell me we're doing layoffs." Dancing around the issue makes the memo-writer feel better, but it just really aggravates the memo-reader.

And here's the most important point: If you're the CEO, you've still got 90% of the workforce that you have to lead. You need them to trust and respect you. But if they think that you don't have the guts to be straight with them, they'll never trust you again.

Just imagine that your doctor was coming to give you bad news about a diagnosis. Would you trust this doctor if he/she spent 5 minutes spewing rambling nonsense and didn't have the guts to look you in the eye and tell you the truth? Bear your answer in mind the next time you sit down to write a memo.

Second, dispense with the MBA-speak. Phrases like "progress brings change" are meaningless nonsense. Progress brings change? Whoa, no way. Next you'll tell me that rain brings moisture.

Third, NEVER begin a memo with the phrase "as you all know." If we all know it, there's no need to spend a paragraph telling me about it. (This is a hyper-specific critique, but around 50% of the layoff memos that we see actually begin with this phrase). (Get best practice examples at our upcoming teleconference Managing Layoffs Without Destroying Your Culture.)

Fourth, the memo says "You will continue to hear much speculation about our company in the press" but never offers any specifics that might end speculation. Of course people are going to speculate. What else would they do in the absence of any real facts? Imagine if you just had an important medical test and your doctor said "I have your results, but I don't want to tell you for another week. But I also don't want you to speculate. Just stay focused on your current life, and next week we'll discuss how long you have to live."

The most respected leaders in history get high marks for authenticity, honesty, and trustworthiness. Were Washington, Lincoln or Roosevelt known as vacillating wimps who couldn't give a straight answer OR straight-talkers who spoke the truth? For you trivia buffs, the Gettysburg Address was 271 words, and that was a speech to save the United States of America. How many words do you need to save your organization?

So how do you write a layoff memo? I can't cover everything here, but let me offer a few quick thoughts. (Get very specific help and great examples at our upcoming teleconference Managing Layoffs Without Destroying Your Culture.)

First, get to the point. You've got 2 sentences until you say the word layoff. That's it. Your people can take bad news. Don't add insult to injury by torturing them with hundreds of words of vacuous nonsense before you tell them the truth. You'll have plenty of words to explain how you made your decision, next steps, etc., but only AFTER you get to the point.

Second, use hard data where possible. If you're laying off 10% of the workforce, say that. Don't say "we're downsizing consistent with the needs imposed on us by the market, and by the way, please don't speculate about just how many people will actually be laid off."

Third, be human. If you don't normally talk like a business school cliche then don't write that way. Be yourself (the most honest, courageous, direct, caring version of yourself).

Yesterday, approximately 50,000 people were laid off. And the majority of the memos that announced those cuts were insulting and ineffective. Please remember that at some point in the future, you are going to have to lead all the people that remain. And how you handle this tough job right now is going to determine whether your future leadership job is easy or hard. (Get all the tools and techniques you need at our upcoming teleconference Managing Layoffs Without Destroying Your Culture.)

About PsycheSelling.com


Psyche-Selling TM is a wholly-owned brand of Directions Management Consulting Pte Ltd that specialises in the field of improving sales performance by enhancing the performance of the entire sales team.  Apart from the regular "selling skills training", Psyche-Selling TM conducts pre- and post-training analysis, interviews, monitoring and reviews, working closely with managers and even senior management, to deliver real improvements in sales leadership and performance.


Here's a profile of our valued clients and partners for 2008:


Andy Yeung, VP Sales & Marketing China, the Ascott Group.  Andy rejuvenised the entire Ascott sales force, hitting 94% of sales targets by 31 July 2008.  This is despite the travel controls due to the Beijing Olympics and serious poaching of good sales staff from competitors.  Through Andy's efforts, he was able to stabilise the sales force attrition rate, and went on to post record sales in a soft market.  While 2009 will be a tougher year for the hospitality industry, I believe Andy will grow the Ascott Group's business in China from strength to strength.


Belinda Ma, Special Project Manager, Dell China.   We had the good fortune to work with Belinda through our associates, A.S.K. Learning for a major Dell project in China and the rest of Asia.  Belinda has shown outstanding dedication and commitment to her project, and has given us exceptional support (even in the middle of the night).  While her straightforward style of communication may have ruffled some people, her straight-talking also means she's all business and no-nonsense.  This is despite that she still has to care for her one-year-old son, while giving 120% to her work.


Dirk Lange, Investment & Operations Manager China, Duravit.   Dirk is one of the few senior managers who has the foresight to build a training centre, not just for internal staff, but for Duravit's channel partners.  This is despite that the economy is fast getting into "winter" mode, but Dirk truly sees beyond the short term, and feels that the future of their business rely on well-trained and well-prepared sales people and channel partners.  Dirk went for an extended vacation back home to Germany in September 2009 and left his entire operations to his Chinese team.  Not only did things run smoothly during this period, Dirk actually received minimal work-related e-mail.  Dirk is standing testament that "lao wai" managers in China can lead productive and motivated work teams in China, even in their absence.   


Robin Rajpal, General Manager, Intercontinental Hotels Group, Zhengzhou.   Robin is the General Manager that other General Managers hate.  He is the maverick who will rock the boat but achieve outstanding results nevertheless.  In the lull summer months of 2007 and 2008, rather than trying to drive occupancy rates through massive discounts, Robin drove 2 campaigns: one is to sell moon cakes, and the other is to promote their German Beer Festival at their hotel (only the band was German; the beer was Carlsberg).   The moon cakes alone took in more than RMB 5 million and RMB 7 million in 2007 and 2008 respectively.  That is better than selling 5,000 extra room nights.   


Hence, Psyche-Selling TM would like to be known as the preferred choice of outstanding and remarkable clients, and pride ourselves as such.  We will also be continuing to assist our clients achieve greater heights in 2009 and beyond.

Enquiries and suggestions, pls. e-mail info@psycheselling.com or visit www.psycheselling.com