Which Comes First, Motivation or Compensation?

Most companies struggle to take full advantage of sales compensation planning potential due to the lack of understanding the impacts to the organizations profitability, use of the proper tools, compensation expertise and visibility. The result is often misalignment between plans and corporate goals, delays in payment and reporting, unclear plan documentation, inaccurate or incomplete calculations, and excessive overhead. The strategic nature of incentive compensation planning becomes more apparent from the perspective of an organization’s second highest variable, expense after salaries. Paying on these ineffective plans can often lead to the cost exposures of overpayment. In the end, the sales force becomes de-motivated, while productivity is drained and sales opportunities are missed.

The output of salespeople is usually measurable against goals, costs, results, market potential and the competition. Therefore, the compensation plan should be designed to direct the sales force activities and behaviors to align with the corporate revenue and profit goals. Most organizations recognize the sales force as a significant contributor to the achievement of revenue and profit objectives. The sales force productivity assessment process should include measuring financial results. These measures can be stated in the compensation plan as absolutes of a fixed level of sales and or profits.

Financial results can be conveyed as a percentage of goal attainment or relative to prior year’s performance. They can also be expressed in relation to market share against competitors. Corporate strategy and management will decide which results drivers are most important and that will influence sales force behavior to achieve the most advantageous results.

The design and implementation of a sales compensation plan is significant with the organization’s long-term strategy and business philosophy to improve sales force performance, and has become a key driver to successful and profitable business growth.  It is simply not enough to make an attempt to modify an existing version of a compensation plan in hopes of motivating the sales force. While every compensation plan has advantages and disadvantages in the incentive effects, incentive intensity and risk the use of behaviors versus results provide performance measures mechanisms.

Because compensation plans have limitations based on organizational strategies and personality profiles of the sales force, organizations often elect to combine other productivity drivers when measuring results. Competitive compensation plans could result in high levels of competitive behavior and alienation of less aggressive personality types. A cooperative compensation plan could result in the disproportionate compensation of the efforts of high individual performers and create a de-motivating effect. However, offering a compensation plan aligned with the corporate strategy and goals minimizes the impacts to the organizations profitability.

The Priviledge of Responsibility

The question of what makes a leader can perhaps be answered with the acknowledgment that responsibility is a privilege. It would be relatively safe to say that not all people would agree with this statement, nor could all people accept the responsibility of leadership and be privileged to do so. The essential leadership qualities and individual components that make someone a star executive or perhaps a star general can be considered the authentic character traits one is born with. How the authentic character traits are developed can be attributed to a person’s environment beginning with heritage, heredity, family values, culture, traditions and life situations.

Respected leaders are not thought of in relation to their attributes, rather through observations of what they do and who they are. These observations demonstrate if a leader is honorable and trusted, or self-serving. Can a person be identified as a leader if their self-serving accomplishments are at the expense of others? Who would follow such a leader and could they really effect change? From a positional perspective some people would obey the commands of a figurehead and many would dismiss their intent as not credible.

Leaders spend their careers exercising the basics of strong leadership with an honorable character and selfless service. People will follow out of respect to a leader with a clear sense of direction. A sense of direction is achieved by conveying a strong vision of the future. Good leaders build trust and confidence in their ability to lead through effective communication. Their ability to communicate effectively and to demonstrate through actions can be considered as critical leadership traits of winning the trust and confidence of the people.

Effectiveness and strength of character can be demonstrated through two-way communication, much of it nonverbal. When leading by example a leader communicates their willingness to do what needs to be done regardless of the situation. What and how communication is directed and received either builds or harms the trust between leaders and followers. Communication is considered as critical to motivating and engaging people to action. Directed communication can also be one of the fastest ways to get results.

Different situations call for different communications and actions. Actions taken in one situation may not work in another situation. Leaders are required to use good judgment in deciding the best course of action and the communication style needed for each situation. What an individual actually does is in large part dependent upon the situation at hand. Little focus has been given to leading people in a crisis. During times of crisis leaders often operate with understandable caution. Anxiety and fear runs extremely high in a crisis situation. The volatility during these times calls for a leader who can respond with decisive action.

If any theory applies to my own leadership style it would be Situational Theory. What an individual actually does is in large part dependent upon the situation at hand. There are certain characteristic traits of mine that dictate my style and actions. I do not ask anyone to do something that I would not do myself. I lead by example and have found that it works in most situations. I have a strong belief that right and wrong are absolute, and so is moral integrity. As a leader I have found through my own experiences in corporate environments that ideas are easy. However, implementation is much harder. Leaders must have the courage to do what is necessary, regardless of the situation.

The Ultimate Responsibility of Job Satisfaction

While there are a few different methods of evaluating job satisfaction the bottom line is personal responsibility for one’s own satisfaction, or lack of. Protecting and nurturing ones health and emotional well being by communicating their needs assertively in their work relationships is a part of taking self-responsibility. Other important parts of self-responsibility include acknowledging sole responsible for life choices, accepting responsibility for feelings and thoughts not blaming others, developing self esteem, structuring time management, stress management, confronting fears and pro-active burnout prevention. While all of this may sound harsh and there is no mention of entitlements for all the hard work produced and countless hours of dedication, it is the reality.

Job satisfaction is psychological relating to one’s feelings or state-of-mind regarding the nature of their work. Job satisfaction can be influenced by a variety of factors. Regardless of the influences affecting job satisfaction there is one overriding psychological aspect that shapes work place behavior, and that is attitude. Attitude plays a very important part in job satisfaction and is a key metric in evaluating not only satisfaction, but also involvement, commitment and performance. Considering the state of world economy today it is reasonable for employee attitudes to be less than positive.

According to the Bureau of Labor Statistics of the U.S. Department of Labor, a reported 2,157 mass layoff actions in July 2009 left 206,791 individuals out of work (Statistics, 2009b). As companies look to reduce the cost of doing business during slow economic times reduction in workforce is often necessary. If the business cannot support the number of employees with the current or forecasted revenues there is little else, short of increasing sales that a company can do to survive. The Bureau of Labor Statistics began reporting compensation costs for private industry in 1980. The smallest percent change ever reported was for the 12 month period ending June 2009 at a 1.5 percent increase in wages, salaries and benefits (Statistics, 2009a). The prior year 12 month change was 4.2 percent, reported in June 2008 (Statistics, 2009a). With statistics like these it is understandable why employee morale and job satisfaction are top priorities of management.

While payroll and benefits are a large part of the company’s budget, there would be no budget without productive employees. Studies have shown that employee attitudes are related to the financial performance of organizations (West, 2009). This scenario is reciprocal in that organizational financial performance affects employee attitude as much as the converse. Add the financial impacts of customer satisfaction to employee attitude and organizational performance. The cycle that could ensue with the combination of these three factors could further devastate an organizations financial performance beyond outside economic impacts. With the unemployment rate reported at 9.7 percent in August 2009 employees often fear the worst while employers try to figure out to ways keep the workforce motivated and productive (Statistics, 2009c).

Job security fears ultimately lead to decreased job satisfaction and a greater propensity to seek other employment. As employees focus more on their fears of pay cuts and unemployment they become concerned about their marketability and skill sets in a job market oversaturated with available candidates. The high costs to the organization involved in workforce attrition include the hard dollar costs recruiting, replacement, relocation and training, and the more soft costs of decreased employee morale, experience base, over-burden and burnout of remaining employees (Noble, 2008). Additionally, profit maximization through cost cutting measures often result in layoffs. The remaining workforce are expected and needed to do the work of the positions that have been vacated, either at will or through forced reductions. Organizational stability is compromised when heightened job insecurities about potential job loss affect job performance.

The challenges facing organizations and managers today to keep their workforce motivated and productive consist of multi-faceted internal and external environmental contributors. Understanding how the external economic environments impact the organizations internal decisions and managing how those decisions are perceived by employees is daunting enough without adding customer perception and the ultimate effects to the bottom line. The Pew Research Center recently reported that American workers experience higher levels of stress working longer hours for less pay and job satisfaction down by 19% on average from two decades ago (Stringer, 2009). Armed with countless research studies and employee survey results managements ultimate responsibility is the financial well being of the organization, which in large part includes employee satisfaction.

Communication is a basic, yet crucial, skill that all managers should be required to possess and use well. Good communication skills require an advanced command of language and rapt listening capabilities. Silence is not always golden, although it can be when listening intently. Communication demonstrates management’s concern for and interest in the workforce, both professionally and personally. Lastly, communication builds trust, especially in uncertain times (Sora, Caballer, Peiro, & de Witte, 2008).

Motivating the workforce through their engagement of shared responsibility, vision, commitment, contributions and support will assist in mobilizing them to execute the organization’s objectives. Being an effective coach is a key competency required of an organizational leader. The manner in which a coach motivates the workforce can contribute to job satisfaction more than all other factors combined. In the role of a coach, management can direct decisions and choices toward those most beneficial to the organization and its employees (Onyemah, 2009).

The organizational culture embodies traits and characteristics which are carried on throughout time. The culture is the unwritten guidelines in which employees and management operate as they carry out their daily activities and encounter new situations. It establishes the baseline for decision making and acceptable activity (Adame, 2009). Strong cultures provide well defined guidance to making the most appropriate choices in a given situation. Weak cultures are reflective of inconsistent actions and decisions that are disconnected from the goals of the organization. If inappropriate choices are made it can create tension, dissatisfaction, lost productivity, lost sales, revenue and profits. Employee and customer defection are likely to result when the organizations culture is in flux.

Premier organizations are challenged to retain their edge in today’s economic environment. No single formula for job satisfaction exists. It may require something new and different. It may require a new level of personal responsibility. To achieve and maintain any level of job satisfaction employees have to be agile with the ability to adapt to the ever changing business environments of an uncertain global economy (Mulki, Lassk, & Jaramillo, 2008). Organizations whose leaders are flexible and adaptable to constant change with the ability to successfully manage the transitions will provide greater resources for employees to achieve higher levels of personal responsibility and satisfaction for their jobs and lives.