It’s not just Al Gore. We could all do a bit better with the environment. A big offender is the use of paper for printing.

Once its printed, we probably stack it somewhere so it can attract dust. Let no desk surface be uncovered!

Then, we wonder where that dang printout of the schedule went. Didn’t I print it just the other day?

Well, wake up! There are easier ways to manage your docs and then find what you need.

I learned my lesson when I decided to sell TransDigital. We accumulated paper in all forms: plain ol’ wasted paper, signed contracts, technical specs for projects, project status updates, and so on. The prospect of physically moving all of it was not enticing. So, right after selling, we bought an eFax account and faxed it all to ourselves. This allowed us to do the following:

• Recycle the paper
• Organize all our important company documents and quickly recall them
• Store all company documents electronically
• Quit worrying about the “act of God” issues: flood, fire, etc.

I still follow the practice of scanning all important documents (home and work). It’s simplified my life.

Your company can do exactly what I did or do it a little more professionally. There are companies that exist to scan, sort, and store documents. (If you are using them, then this post is skippable!). There is also software that can help you with this.

We sell a system called Teleform (retails at $8000/desktop scanning station). It helps companies manage documents and is one of the industry leaders. When you combine a system like Teleform with internal processes, you can achieve the type of benefits I did. We manage all our POs, signed contracts, policies, etc through scanning systems.

If you are growing rapidly, you should look into software to help you manage the paper, routing documents, and develop a retention policy. Otherwise, you’ll end up buying a lot of filing cabinets, wasting employee time looking for documents, and being frustrated.

Some resources:

Amdoc , Teleform, VeBridge

In my previous post, I listed some questions related to general company compensation plans. This post is about sales-specific commissions and compensation. It does not delve into the intricacies of every factor involved, though. This is a primer on commissions from my perspective with a few brief examples at the end of the post.

First, let’s look at this question: “Should everyone in the company be eligible for a commission?” Yes. Everyone working at the company has an interest in its continued operation. People may not always think of the company and its well being, but once a person has a taste of the red meat of commission, a new desire is known. You could use a commission as one element in a strategy to convert people from thinking “I have a job” to “I’m building a career at this company”.

The sales team should happily give up a portion of its commission to the person who helps bring in new revenue.

Next, let’s look at the make-up of those involved in a sale and how they might be commissioned. Typically, a professional services firm will have various “levels” of consultants and no true “all I do is sales” people. Everyone is supposed to bring in business, but its the senior partners who are really in charge of this process along with other management responsibilities. These senior execs do not often handle the technical work performed though. We now have a situation where the following can occur:

1. Mr. Big lands an account while golfing with some club buddies
2. Mr. Next in Line scopes the work and performs the grunt work involved in contracting the account
3. Messrs. Just Hired and Just Got My Visa actually perform the work contracted.

So here are four people who should get some form of commission. These people also require administrative support and I believe everyone should get a piece of the contract if his part is successfully executed.

Here is what I’d like to see in a new project, new client deal:

Role	Commission
Mr. Big (the Hunter)	10% gross profit (main annual comp comes in the form of profit sharing)
Mr. Next in Line	3% gross profit (higher base salary than those lower on the totem pole)
Messrs Just….	5% gross profit if its a profitable project (see below)
Administrative Support	3% gross profit split amongst all support staff
Bonus Pool	Everyone splits extra gross profit if the project comes in underbudget and the client is extremely happy

These are examples related to a firm that has recurring business and does not desire to grow like a weed. The commissions are designed to give everyone a piece of a contract.

The thinking behind this plan is that Mr. Big is going to continue to look for deals, Mr. Next in Line wants Mr Big’s cash comp and will learn the ropes of contracting prior to promotion, and Messrs Just will try their darndest to make it a profitable project. Administrative support should seek to provide as much assistance possible and keep the number of their staff low so the commission is split with fewer people.

If this was not new project, new client, but rather new project, existing client then I would make sure to compensate the person who brought that client in to the firm originally, too, even if he is no longer servicing the client. Why? Because everyone should benefit from thinking about new sales. The commission should only be about 1-3% if he is no longer working with the client.

Next, what factors really affect the achievement of new revenue? Is it the number of appointments? Is it referrals from existing clients? Make sure to factor this into your compensation (not commission) plan. If its number of new appointments, then reward the person who is setting the most new appointments.

Next, what type of business do you want people to focus on? New sales, repeat sales, sales of things, sales of services, local sales, sales in an industry vertical, etc… Make sure you grant greater commission on the types you want and make it clear why. I met a guy who actually paid less on larger deals. Um, yeah, let’s keep the deal size small…

Next, do you need “pure hunters” — those people who only bring in new leads and close business deals? This is a sticky subject with some firms. The reason why is because they often make the most money and other staff perceive them as not working as hard since they are out of the office a great deal. This is a results-only position. Effort does not matter. I like the idea myself, but it is very difficult to do in a professional services firm where relationship building is critical. If you can do it, your company will reap the benefits of a successful hunter and rich client relationships.

(For those of you interested in the hunter’s perspective this video is a funny take on selling activities.)

Other factors to consider with commissions:

Do you pay a pure sales person full commission if a project he sold turns out to be a money-losing deal?

How long do you pay a commission? For the life of the account or for a finite time period?

Do you pay commission when a contract is signed or after the project is complete and profitable?

What do you do when a client is late in paying an invoice?

Brief Commission Examples

Small Company interested in attracting new clients

pay sales more for new clients; pay support for retaining business

Direct sales software firm interested in its stock price

pay higher commissions on sales of new licenses and support plans, but lower on professional services (this increases revenue without increasing cost)

Small professional services firm (10-50 people)

pay great commissions for new clients

Large professional services firm (over 100 people, but not a behemoth)

pay great commissions on recurring business with existing clients and new projects with new clients

I’d love to hear your thoughts on the idea in this post. If you are interested, I can dissect a real sales compensation plan for a small It services firm to give you an example of the pure hunter compensation.

About a week ago, I commented on a post at David Maister’s site related to sales commissions. Both David M and David Kirk asked for a bit more explanation of my comment. (This is not uncommon since I can be unclear more often than not!)

This is a copy of the original comment post:

I see different compensation schedules at each of my clients. They hire me to help them figure out the best method. Some believe there is a “golden rule” for how people should be commissioned. 

Every company, and sometimes department, needs a system that works for all the players involved in growing the business (business developers, outside sales people and some inside sales), maintaining the business (inside sales, service, and project technicians), and managing the business (administration). 

In all the years I’ve done this, I’ve never created one system that is a clone of any other. Personal and group culture and the company direction are the strongest factors involved in my work. 

The rest of this post is about general compensation. The next post will be sales-specific.

There are a few questions I ask when handling compensation:

1. “What am you trying to achieve?” Business owners may want to be the next Microsoft or they may just want a comfortable lifestyle business. Whatever is desired must be clearly stated and measurable in order to build a business around the desire(s). Are you trying to grow quickly and sell the business? Are you trying to lower client attrition by 10% this over the next 2-3 years? What is our strategic plan for the business? Always find out the timeframe with the desire, too.
2. “Who will help you achieve the desire(s)?” For the purpose of this article, let’s just consider people internal to the company. Typically, this is at least one sales person, a technical or delivery person, and some administration. Depending on the size of the business, this could be a team of people (General Mills requires hundreds of people to put cereal on grocery shelves) or just a few (look at our thousands of understaffed small businesses where everyone wears many hats).
3. “How will you communicate my desire(s) to these people in a way that creates incentive to help you reach the desires?” If I started a business tomorrow and told the staff my goals for the company are to get a million dollar house, a yacht, and fund a Hollywood movie, I doubt I’d see peak performance from them. However, if I let them know I’d like to grow the business to $20MM in revenue with a 10% net profit and a 5% profit sharing plan of which they are entitled to, then my result might be slightly different. (So far, we’re just dealing with the cash aspects of compensation and company mission.)
4. “How is each person on the staff compensated for his effort and for going above and beyond?” I start with this question to learn two things: a. how are people comp’d now and b. is everyone entitled to recognizable comp for being a superstar?
5. “Does each person have a piece of short and long term results?” This is key. Many businesses offer a salary, a year end bonus option, and “standard benefits”. Talk about boring the heck out of someone. Everyone should have a shot at short term compensation bumps (like a commission) and long term benefits related to the performance of the company (stock options, profit sharing, etc).
6. “Is the compensation plan clearly understood and achievable?” Everyone should be able to measure his progress and see/hear others who have achieved success with the same or similar plan. This is critical to buy in.
7. “What non-monetary compensation is available?” We need cash to pay bills and plan for retirement. We need more than this though. For some people, its recognition, for other ongoing training, and so forth. Personally, I love it when a manager and direct report come up with something together on a quarterly or annual basis such as “a five day trip to Mexico” or “extra time off to help rebuild New Orleans”.
8. “What is the risk to the company and staff is we a. exceed our projections, b. horribly miss our projections, or c. achieve our projections?” Compensation plans are wonderful when a business is being planned. They make sense then. What happens if your annual revenue plan was $15MM and you achieved $30MM or only $5MM? Is anyone grossly over or underpaid? Is the payment justified or easily understood?
9. “How often will we review the compensation plan?” This is important to do annually with new companies and every few years with established firms.
10. “Will you allow exceptions?” Does a recognized expert in your field who just accepted a position with you get a deal outside the normal compensation plan? Typically, they do. This is easy. But, what about the new hire who wants to work from him two days a week when others in the same employee classification do not have this luxury? How you handle these exceptions is key in maintaining morale.
11. “Are you paying for results or time?” I hope the answer is the former, but too often, I see its the latter. Changing company culture so the focus is on results is much easier when all staff have the benefit of short and long term compensation bumps. Otherwise, you could be hiring people who just need a job.

These are the questions I ask of managers and business owners when I’m engaged to review a compensation plan. My next post will be about sales commissions for staff.