This technique rocketed salesrep retention from 50% to 97%, and made the area implementing it the highest performing one in their Group for a business information vendor a couple of years ago. It comes from the way car factory workers in Japan are financially rewarded when hitting their output targets.
The idea is to pass on a proportion of the profits at the end of the year to the top-performing reps, over and above their normal remuneration. It’s all part of a development known as ‘Japanisation’, where Japanese management techniques filter through into Western businesses.
The example here involves a pot of money being made available from whatever 10% of the profits were to be. To qualify for part of the bonus pool, you needed to reach 110% of target. Three other indices were introduced. If you hit each one, the year in question the extra bonus you received was a whopping Eleven Grand. And almost as good, it was paid just before Christmas.
The other marks were two relating to sales of particular (recently introduced) product lines and overall growth for your patch of 6% (regardless of any customers dropping out). The earning potential really made people buzz apparently. Once the new (second) year began, the entire sales team were mega-motivated. Then after a storming first quarter, the kind of management decision that gives the profession a bad name was made; an announcment that the incentive scheme was being changed. Virtually every top performer left for pastures new within the next two months. Unbelievable.
Anyway, it was so successful for all concerned whilst it lasted, that one fella decided to employ Japanisation on a bit of renovation he was carrying out on a property. He managed to get ‘mates rates’ from 3 friends (a plumber, electrician and builder) to conduct and project manage the work. It lasted a few months, but their personal motivation and commitment was evidently amazing. The instigator did the deal to pass on ten percent of any profit from the sale that he’d conduct at the end of the renovations. They each earned an extra grand as a result and have been badgering him ever since for more work. And the building job was completed ahead of time, to budget, and with no mess-ups.