Pay for Performance

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Pay for Performance

We think it’s high time DMSRetail weighed in on the subject of Pay for Performance compensation plans.

First, let’s dispel the myth that Pay for Performance compensation plans work against a great shopping experience. This is simply not true. In fact, quite the opposite is true. A solid, uncomplicated Pay for Performance compensation plan will enhance the shopping experience.

Those who believe the myth, do not see the big picture. They think that the moment you offer rewards for selling, then you will have in-store fighting in the presence of the customer; that customers will be hounded by one sales person after another, and a whole host of other disastrous events taking place.

To be clear, we do understand that there are badly managed, insufficiently trained, unprofessional sales people who will, in fact, cause problems if allowed to. Of course, as is the case with any group, there could be some bad apples and if those bad apples are allowed to continue to degrade the shopping experience for the customer then, yes, that would be a serious concern.

But what, and who, would really be at fault in those cases? Certainly not the compensation plan…probably management. And, if management can’t correct situations like the ones mentioned above, they probably have other issues as well….probably quite a few, in fact!

Rather than dwelling on what can go wrong …let us look at the extraordinarily huge benefits to be enjoyed when a solid Pay for Performance compensation plan is properly in place.

Speaking of compensation, here’s a list of guys who very likely make (or made) considerably more money than many of their teammates: David Beckham, LeBron James, Wayne Gretsky, Sidney Crosby, Magic Johnson, Michael Jordan, Derek Jeter, Diego Maradona and Kevin Durant.

What do they have in common? They’re superstars in the world of sports, of course.

Every team needs superstars. If everyone was paid the same amount, with no opportunity to make more, those who are more skilled or talented – and those who are willing and able to push themselves really, really hard – might go elsewhere in search of the money that is commensurate with their abilities.

Or, they may end up easing up their own performance and becoming just ‘one of the team’.

If there’s no reason to push their performance level, investing blood, sweat and tears as they say, then why do it? Of course, there are some emotional reasons and they’re very valid. But those don’t necessarily last.

In other words, the best, brightest, top – whatever you want to call it – want to be paid what they’re worth. It’s quite natural and there’s absolutely nothing wrong with that.

People who are against Pay for Performance compensation plans obviously don’t believe top performers should be rewarded accordingly; they don’t think that top performers should have the opportunity to be paid any more than bottom, or mediocre, performers. This thinking is most definitely flawed.

Almost certainly, you agree with the fact that highly skilled, top performing athletes should be rewarded more handsomely than their less skilled, lower performing teammates.

The same is true in business.

There are all kinds of sales people; with different skill levels. Some have a stronger drive to succeed than others. Some have a talent for engaging the customer and building rapport far better than others are able to do. Some are more dedicated to the success of the team and company than others. Some want to make as much money as they can, as quickly as they can.

There are very few sales people, working in retail stores, who don’t think money is important. Money may not be a motivator for people earning at the higher end of the pay scale, but it certainly is a motivator for the majority of those who are at the lower end.

A team of sales people, working in a retail store, can be likened to a sports team. The teammates will never all be the same. There will always be those who are better, or who work harder, at whatever the pursuit – be it sports or business.

Top performers should be compensated for what they’re worth so it stands to reason that we must figure out how to manage the ‘team’ and the ‘customer shopping experience’ in an environment where there is a Pay for Performance compensation plan in place.

No one says this is easy, but it will likely be easier and, certainly, won’t be any more difficult than managing these things under any other plan. Managing your sales force and your customer’s shopping experience is a big job regardless of anything else you’re doing.

But, if you start with the premise that all of your sales people will be professionals with the best interests of the customer and the company in mind at all times and if you recruit the best people and ensure they get the training they require, then a Pay for Performance compensation plan is the only way to go.

All of your results, in anything you do – any plan, any process – will depend heavily on the ability of the Store Manager, or business owner to manage effectively.

If you do not manage effectively, hire well and train properly, you’re doomed anyway – it doesn’t matter how you compensate people.

Some think that it is more difficult to manage and to get great results – to provide the customer with an amazing shopping experience and, thus, get more sales – when a Pay for Performance compensation plan is in place when, in fact, the reverse is true.

What you see with standard compensation plans – where everyone makes pretty much the same and no one has an opportunity to make more – is a group of employees who are just minding the store, taking care of tasks, answering customer’s questions, etc.

With a solid Pay for Performance compensation plan in place, you will not see all of your sales people congregating around a cash desk or hiding near the back of the store or completing a task with their heads down; you won’t see sales people pointing the customer in the direction of whatever it is they’re looking for.

You will see sales people building rapport with customers…actually showing some care and concern for the customer who arrives in the store. You’ll find the product knowledge of your sales people is pretty sharp. And they will try very, very hard to make their sales targets in a professional and non- threatening way because, remember, you hired professionals and trained them well and managed them effectively.

The customer’s shopping experience will be better, not worse. The sales people win, the customers win and the company wins.

Here is a tried and true formula for increasing your sales: Put a solid, uncomplicated Pay for Performance compensation plan in place and manage effectively.

PS: If you need help with compensation plans, please send an email to consulting@dmsretail.com

PPS: DMSRetail’s Ultimate Retail Success Collection approaches everything from a performance perspective and contains a wealth of information about how to manage effectively.
 

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