Does Your Compensation and Culture Align? (Culture Series, Part 4)
This is the fourth post in a new series on how to build a strong culture in your promotional products business.
What if the culture of your business could speak? I mean, actually use words to express itself. What would it say to your team? Because it does, you know. Your culture speaks volumes. All the time.
But where your culture speaks loudest, where it’s heard clearest might surprise you. No, it’s not in your cool branding. It’s not in how your client’s feel about you. It’s in one of the least talked about but most profound place of all: your compensation.
Your compensation choices speak clearly about your culture. Compensation choices whisper to your team, in either positive tones or negative: We believe in you. We trust you. We want you to succeed.OrSell or starve. If you don’t make quota, you’re finished.
We’ve covered some rich territory through this series on culture. Becoming a future-focused culture. Designing a culture of inspiration. Building a Thriving Virtual Work Culture. In this installment, we’re talking about one of the most important cultural indicators of all: compensation.
According to a Gallup study, only 12% of employees strongly agree that they have substantially higher overall well-being because of their employer, and the vast majority think that their job is a detriment to their overall wellbeing. Clearly, we have work to do. As leaders, our compensation choices directly impact our employees’ state of mind, as well as the health of our business for the long term. Compensation is a direct reflection of our cultural values. How? Consider the two primary types of employees on your team, frontline salespeople, and (for lack of a general term) your support team. How does compensation impact your culture with these two groups?
Rewarding Salespeople: The Carrot vs. the Stick
This is a sales-driven industry, and even though there is a myriad of ways you can build a compensation package, the two primary ones are either straight commission or base salary+commission/bonus. (We’ve written about this in detail, so if you want a deep-dive into straight commissions vs. base-plus, check out this post).
The industry was largely built upon a 50/50 split, 50% of the profit to the house; 50% to the salesperson. This model worked well, for a long time, and is still functioning for a large percentage of the industry today, but it’s not going to survive the millennial and Gen-Z generation, and we’re already seeing compensation trends change from some of the most progressive distributors. Why? It’s a tough industry to learn, incredibly complicated and growing in complexity. The new generations are more vocal in their demands from employers today. They want a balanced lifestyle. Flexible work environments. They want to do work worth doing. And it’s a competitive job market and to recruit the best talent you must build a robust culture. To build a robust culture, particularly in a sales-driven industry, we must pay close attention to rewarding the right behavior and inspiring the right activity. How? Let’s take two typical industry examples: Sue and Bill.
- Bill: Bill is hired into the industry with a commission-only compensation package. No insurance options, no fallback, just sales and survival. Bill gets a neat box of business cards, a hearty round of handshakes and team introductions, an office tour, a few team meetings, and a pile of catalogs or industry websites to start perusing. If Bill is lucky, he’ll get a few old clients that no one else wanted, dead accounts (where the key contact left a long time ago) and some instruction on target markets (if he’s lucky). Bill doesn’t get to attend industry shows and gets very little education to speak of, for Bill, it’s sink or swim.
- Sue: Sue is brought on to the team with a base salary, plus commission, plus stretch bonuses. From the start, Sue’s onboarding is different. Because Sue’s base salary helps cover her basic needs (food, clothing, shelter), Sue can truly understand the business. She spends time with everyone, the admin team, the executive team, production teams, accounting, marketing. Sue is not only given the latitude to learn, but her compensation package rewards her curiosity. (And curiosity is one of the chief hallmarks of a successful promotional products professional). Before Sue is ever hired, she understands that she has a yearly sales goal that, if hit, comes with commission rewards. Moreover, the leadership team has built stretch bonuses into her compensation package. If Sue exceeds her goals, she receives additional bonuses on top of her incentivized commissions.
Straight commission means a constant negative churn and revolving doors. True, the winners stay, but many more leave, and they take with them a negative opinion about your business. Compensation that says, “sell or starve” often foments fear and breeds a discontented culture. Sue devotes herself to the company and culture because the company decided to invest in her while Bill always has one foot out the door.
Compensation is always about investment and every investment in a salesperson in this industry is a long-term investment. No new salesperson will turn a profit for you in year one, they might in year two, and should in year three, but, like all investments, they take time. Why not make the right investment up front? Which type of culture do you want to create? A transient culture where loyalty is unimportant and everyone is merely looking for the next best opportunity? Or, a culture that invests, believes, and rewards long-term success?
Rewarding Your Support Team
As an industry built primarily by salespeople, we often believe, to our detriment, that salespeople are the only ones who should participate in an incentivized compensation package. But in this business, a support team can have tremendous influence over a client, and the competency in this area of support is a highly-learned skill. Don’t think so? A support team member can process a six-figure order for your best customer and see it through to completion or miss the deadline entirely. Make no mistake, these roles are as important as sales roles.
There are many ways to create a profit sharing program for your entire team. You can either build one by business unit, making a direct reward program based on the business your support team members touches, or build one as an overall profit sharing program. But here’s why bonuses your support team is more critical today than ever before: Yesterday’s salesperson, the 50/50 split salesperson, was all about the “I” not the “we.” An article by Fast Company magazine highlighted the 5 Things People Who Love Their Jobs Have in Common and #1 on the list was “they enjoy their coworkers,” which is established by mutual trust through the intrinsic reward of accomplishing something together. What a proper rewards-based compensation package does for everyone involved is inspire everyone to pull in the same direction.
There’s much to be said for Matthew Stover’s comment, “if you take out the team in teamwork, it’s just work. Who wants that?” The support team, if not participating in the profit, can become disgruntled which creates an atmosphere of resentment. “The salespeople get all the money and I do all the work,” is a statement uttered a thousand times in this business and it’s a culture killer. A carefully crafted compensation plan that rewards the work done by everyone can ignite an enthusiastic culture. And as entrepreneurs, we are not merely trying to build a book of business, we are trying to build businesses that become self-sustaining, and a self-sustaining business is only created by a network of properly incentivized teams that work together to accomplish a goal.
By building positive tension through growth goals, stretch bonuses, and rewarding everyone when those goals are exceeded, you encourage the right action, foster the right attitude, and inspire a culture of celebration. But mostly, you’ll be shocked at the lift it gives your business, almost effortlessly, by simply structuring an environment where everybody wins.