Scott MacGregor
Let’s agree from the get go that the only constant in the office technology industry is change. However, one area in that world that is often slow to change is sales rep compensation, especially as the industry moves towards a services and solutions model. I speak to a fair amount of dealers and even though this transition is well underway, many are still grappling with finding just the right compensation model for this changing business climate. Then there’s Flo-Tech, a Middletown, Connecticut-based office technology provider. They’ve come up with a radical new way of motivating and compensating their sales reps that doesn’t involve quotas. What they’ve done is not for the faint of heart nor is it for every dealership.
“We thought about this for a long time because there’s so much complexity that goes into a comp and quota plan,” explains Scott MacGregor, vice president of sales and marketing at Flo-Tech.
MacGregor along with Flo-Tech’s CFO and CEO typically meet months in advance of an upcoming year to review the companies comp and quota plan.
“It just takes forever,” laments MacGregor. “You always design a plan, hope it’s perfect, and invariably have to tweak it year in and year out.”
The big issue with traditional comp and quota plans is what MacGregor calls “sandbagging”—sales reps holding onto deals or trying to close them in a time frame that’s beneficial to them.
“That’s almost never in alignment with the customer and their needs,” states MacGregor.
After doing some research, Flo-Tech’s executives found a few articles, including one from Stanford University that illustrated the way quotas result in ‘gaming’, their word for ‘sandbagging’.
As Flo-Tech management delved more deeply into it, they discovered they could eliminate hours of discussions in creating a fair plan by dispatching with quotas altogether. The other thing they found is when trying to apply a quota across an organization, particularly a dealership like Flo-Tech who does business nationwide (with primary offices in major cities like Boston, New York, Philadelphia, Washington DC etc) and reps with different experience in the industry, from 14 months to 14+ years, it’s not easy to apply a standardized quota. Often it’s a fairness issue.
“The guy in Boston has only been there for six months while the guy in New York City may have a bigger opportunity and has been there for six years, so that creates all kind of problems,” says MacGregor.
What Flo-Tech settled on, and MacGregor thinks it’s a novel idea, is eliminating quotas and motivating reps to succeed by tying their daily sales activities to their personal goals. Now he and Flo-Tech’s field sales managers sit down with each rep to help the rep identify their goal.
“One of the things we found in this process is the first few things they think are their goals aren’t really their goals,” reports MacGregor. “They say what they think you want to hear or it’s things that if they don’t accomplish at the end of the day it wouldn’t be the end of the world. For instance, it’s ‘My wife has been after me to hire a landscaper and I need it done by September.’ The truth is if it isn’t done by September, it’s probably not going to change their life.”
A rep’s true goals encompass things like retiring at a certain age, saving a certain amount for their child’s college education, paying off their mortgage, purchasing a beach home or an investment property, or saving a certain amount of money.
“Things that get you up and motivated every day,” says MacGregor. “Once we discover those goals, that’s what we manage to. The beauty is everybody’s goals are different and everybody’s goals far exceed the needs of the company.”
This model has created a more fun and nurturing environment as opposed to making reps rally around an arbitrary number that the company says is a good job.
“Say we say $1 million is a good job, well we’re saying that to the rep in Boston, New York, and Philly, but it’s not always meaningful to everyone to the same degree,” explains MacGregor. “When you’re managing to their specific goals, you’re designing behavior plans to help them reach their goals.”
It’s almost like training for the Olympics.
“Whatever the event it is you know you need to hit a certain time so that’s your goal,” notes MacGregor. “You then build a behavior plan, which is a series of exercises and practice that gets you there. It’s something you have a strong desire to do and you have a coach to push you to do the extra wind sprints and things that you typically don’t want to do but you need to be pushed if you really want to achieve that goal.”
Changing comp and quota plans can be a painful process, but MacGregor says it’s been incredibly well received both by their existing sales force and job candidates.
“They’re typically blown away because they’ve never heard of a company that has no sales quotas.”
He’s not surprised by the positive reaction although he admits it was a scary thing for management to implement.
“Taking that away as a sales manager can be scary,” he says. “Those folks, including myself, had to wrap our heads around this and understand if you can identify somebody’s true goals and then design a behavior plan to get them there, you’re just there to help them reach their goals. It’s a much better way to do business.”
Although Flo-Tech’s sales reps are no longer concerned with quotas that doesn’t mean Flo-Tech’s partners, have abandoned their quotas. Those are still there. How does that work out?
“Because our goals far exceed anything the company needs or what our external vendors are looking for, it’s really not an issue,” says MacGregor. “We had a record-breaking fourth quarter with no quota. I don’t think our partners know we have this new system, but I don’t think they’d complain since our numbers are off the charts.”
The new plan went into effect six months ago and the company began seeing results within two months of implementation.
“We saw numbers increase in terms of appointments—things that are part of these behavior plans,” says MacGregor. “You’re always trying to measure activity even under a quota system, but because you’re driving them to something that isn’t necessarily the most meaningful thing to them, it’s not that they wake up in the morning or go to bed at night worrying about it. It’s more difficult to get people to do all the things they need to do themselves to be successful versus when they’re focused every day and reminded. Say somebody’s goal is to have a Jersey shore beach house, we can send them and their spouse a little something about the beach or a reminder and that’s been very effective.”
Sales reps goals change all the time and Flo-Tech management monitors those on a monthly basis.
“On a daily basis we’re monitoring the behavior plans, but on a monthly basis as a team, sales management, myself and the reps are having discussions as to whether this goal is still the most important thing to them.”
Twenty employees are participating and MacGregor feels there’s no going back to the way it was. As far as he knows, no other dealership in the industry is doing this.
“It’s made my job much easier and my field sales manager’s job much easier. And it makes our sales reps’ jobs easier. The amount of time a sales rep thinks about how to game or sandbag is completely eliminated. This plan frees them up to sell and focus on what’s important to them. Before we were kind of telling people what’s important to them. Now they’re telling us.”
