You’re probably thinking, ‘What’s this Concorde Problem, and how does it impact sales compensation? Let’s dive in…!
Super Sonic Concorde Airplanes
Concorde was the most advanced passenger airliner ever made. It could ferry passengers from New York to London in 3 hours, that’s half the time a Boeing 747 takes. With the pointy nose and futuristic looks, it was the best-looking aircraft of its time. Still, it failed to make a place for itself, and after 27 years of service it was retired in 2003. Concorde – the fancy travel machine, failed to become an industry standard. Why?
While there were numerous reasons for Concorde’s failure, we’d focus on the reasons relevant to sales compensation.
a. The Concorde was a fuel hogging machine that consumed twice the fuel compared to the other airliners. And it carried just 100 passengers- one fourth compared to the other commercial airliners. Even with the most expensive ticket prices, the operating costs of this machine were overbearing on the business model.
b. The maintenance costs were way too high due to Concorde being a ridiculously complex machine. All repairs and fixes, required highly skilled engineers, drawing much higher salaries, compared to regular maintenance staff.
c. Concorde didn’t consider the needs of all stakeholders in its eco system. Its shockwave could shatter glass, and the cities filed numerous complaints against its super loud sonic boom. As a result, it was restricted to transatlantic route, and even on that route, it could go supersonic only over the ocean.
d. Most importantly, the interior design of the plane didn’t consider the overall experience of the real end user – the passengers. It’s best described by one passenger as, “Once through the doors of the sleek, tiny, cigar tube into the body of Concorde, things were small and cramped and uncomfortable.”
e. The unfortunate crash of 2000 was the last straw, creating massive trust issues, ultimately leading to its demise.
Overall, a bunch of smart engineers designed Concorde because they wanted to be at the cutting-edge of aviation technology. They didn’t consider the operating costs, the maintenance costs, stakeholder feedback or the end user experience.
Now, does it sound familiar to what we often see in our world of sales compensation?
Concorde problem in Sales Compensation
Over the last 20 years, several software tools have been launched in the market, offering technical capabilities not imagined before. These tools give plan designers unlimited power to design and implement a sales compensation program as they fancy, no matter how complex it gets.
It doesn’t matter which SPM tool you use – SAP, Varicent, Xactly or something else, more complex the incentive plan, more resources it takes to implement the tool. More complex the system is, more it takes to administer the system and handle the disputes. Small changes in plan design will require massive re-engineering efforts. Just like Concorde, these technically sophisticated incentive plans, will require higher operating costs and unexpected maintenance costs.
Armed with sophisticated SPM tools, the plan designers sometimes get carried away and bring in new complexity just to follow the business strategy. In the process, they often ignore the overall experience of the salesperson. They don’t redesign the commission statement, to ensure that every salesperson can truly understand the underlying logic. When sales team doesn’t understand, it leads to shadow accounting, productivity losses and lack of motivation. Passengers didn’t like the interiors of Concorde, and salespeople don’t like overly complex commission statements.
It is important that salespeople trust their sales compensation calculation. Once the trust is lost, it is hard to earn back. Concorde, after that crash in 2000, could never earn the trust again. Hopefully your sales compensation program doesn’t end up like that.
Recognizing Concorde Problems in Sales Compensation
There are several indicators that your sales compensation program may have a Concorde problem, and that it requires some corrective measures.
a. High turnover in sales team
b. High number of commission disputes
c. Large team of comp administrators, compared to the industry
d. High consulting budget for annual plan changes
e. Inability to swiftly rollout plan documents for the new plan year
The thumb rule is, if you are required to conduct training sessions to help salespeople decipher their commission statement, maybe you do have a Concorde problem!
We as humans often get excited about stretching the limits, sometimes leading to half-baked and unnecessarily complex outcomes. When this is done in the world of sales compensation, it leads to backlash and poor business results.
“Have you seen a Concorde problem in your sales compensation program?” If ‘Yes,’ please email me at mgupta@spectrumtek.com. I’d love to hear your experiences and what you did to make it better.