List Some Non Performer Type Jobs In The Music Industry The Seven Banes of Pay For Performance Systems in Consulting Firms

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The Seven Banes of Pay For Performance Systems in Consulting Firms

Did you know that in ancient Greece, business owners used to collect money on overdue accounts by throwing rocks at non-paying customers?

These days, clients seem to have the right to stonewall some consulting firms that fail to deliver on the value they promise.

So, what causes the gap between promised value and delivered value?

The problem seems to be high up in the management hierarchy of consulting firms.

But before we delve deeper into the topic…

A closer look at history

At one time, consulting firms were happy to acquire clients because they knew they were positioned as respected experts, and potential clients wanted to speak with them to determine whether to hire the firm.

Peer-to-peer connectivity between buyers and sellers was vital. The senior managers of the buyer companies interacted with the high-level people of the consulting companies.

Then someone came up with a great idea to be more efficient…

“Hey, we’re professionals. Customer buy-in plays a small role in our reputation. Let’s hire some buzzwords to reward customers based on performance.”

But this mindset has created an attitude among many consultants that selling their services is far below their value, and they decide to collect individual sales forces on performance fees to generate new business.

These sellers are not subject matter experts. Sellers who sell second-hand cars, coffins, and consulting services.

There is a common misconception that there is a direct correlation between a salesperson’s commission and their income.

But not all revenue is equal, and not all customers are equal.

Also, in order to increase the sales force’s earnings performance, some firms include various lock-in periods in their contracts to limit salespersons’ commissions.

But have we thought about the attitude of these custom sellers who are hired as mercenaries and what happens when they start operating as mercenaries?

Most consulting firms have never seen the dark side of pay for performance.

So it’s time for us to do it here and now…

So how does a pay-for-performance system work for consulting firms?

Consulting firms should be undivided business structures.

In industrial plants, there are independent silos where the left hand does not know what the right hand is doing. It works because they are independent silos. Like a symphony orchestra. You play your part from the page and that’s it. You watch the conductor and your page.

But a consulting firm is like a jazz combo. No sheet music. There is no conductor. The members go through the character of the next solo song quite smoothly. They can go from bebop to R&B in seconds and no one will miss it.

But can the group’s potential be divided among individual artists? Yes, sweaters can keep you warm in the winter, but it’s the fiber that keeps you warm. What fiber would you like to reward for helping you survive the winter?

Consulting firms sell 5-6 or even 7-figure deals, and there is no way to single out one person for closing that sale. It is always a team effort for both buyer and seller.

Some Disadvantages of Pay-for-Performance Systems

1. Ignore the firm’s ideal customer profile

Consulting firms must have the Perfect Client Profile to attract the best potential clients.

But when salespeople are in a pay-for-performance system, it doesn’t matter what type of customer they get. They need a commission to pay the mortgage, pay the kids’ college tuition, and put food on the table. So all they need is a living body with a check in hand that pays the bank, so they get paid. Other than their position is simply irrelevant.

Yes, it’s nice to have great customers, but they can’t turn down money.

Who cares if they have problem customers? Only consultants should work with them, not salespeople.

2. Focus on what the seller wants

We only focus 100% and focus our energy. The more salespeople focus on what they can get out of the deal, the less they focus on the prospect.

According to RainToday, an online knowledge base and professional services research database, the No. 1 customer complaint is that consultants don’t listen and are too quick to offer solutions.

Rewards are earned in a performance environment, which is really a scarcity-driven environment, where salespeople operate on a sink-or-swim basis, so you have to focus on what you can get. If they don’t make sales, they’re starving.

3. Ignoring the long-term success of the firm

If salespeople are paid for short-term “quick buck” performance, they can’t focus on the long-term success of the firm.

The problem with fast money is that the margin on it is usually thin. There seems to be an inverse relationship between the landing rate of clients and the profitability of their projects.

Focusing on quick money means this firm has no longevity. Here today, gone tomorrow. Therefore, traders also keep their eyes closed for greener pastures before they die by grazing this pasture.

4. Do not compete with colleagues

If salespeople are paid individually for making a quick buck, what is the incentive for them to help their colleagues? Nothing! Not ham. In fact, they are interested in stealing opportunities from my colleagues so they can look better in the eyes of their managers and make more money.

As I see it, there is a lot of competition in the market outside the firm, so it is better for all partners to work together to overcome external competition through internal cooperation.

But this internal cooperation almost never happens. Therefore, we entered the competition again to issue our personal number.

5. Falling for full participation

If salespeople are in a pay-for-performance system, they know they don’t really belong to the firm and can’t expect the firm to stand up for them if something bad happens to them. They are 100% expendable.

It reminds me of when Quintus Arrius, the new consul in Ben Hur, descends into the fire tunnel and announces to the slaves…

“You are all convicts! We keep you alive to serve this ship! So row well!”

This is the essence of individual​​​​​​​​​​​​​​​​​​​​ You cannot outdo others. Individual​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​V They want to earn money and know how to get it.

6. Unfaithful

If salespeople do not belong to the firm, they do not have to offer only their performance to the firm. They are essentially free agents, so they are free to pitch any business idea to anyone. As mercenaries, they can offer anyone a chance to earn more than their own firm.

Some people might call it betrayal, but what I’m suggesting is that you don’t betray an organization you don’t belong to. If you operate on the principle of “Eat what you kill”, I do not consider myself to belong to the organization.

7. No expectations Only hope

As a manager of these salespeople, you cannot expect your salespeople to produce anything. But they have every right to hope so. You don’t pay them, so they don’t belong to your firm.

Expectations are what we earn right when investing. A beggar can only hope to get food. He wants it for free. A paying guest has the right to expect to be served in a restaurant. He is willing to pay for it.

In a commission-type compensation structure, producers receive 10-15% of the value of their production, with 85-90% going to the employer or client. That’s good, but I also think that the highest value getter, the 85-90 percent, should invest in production capacity. And this is the base salary to show that the salesperson is part of the firm.

For this reason, the money that firms ultimately earn is called the return on investment. The current commission structure seems like someone’s return on investment. The firm’s return on investment in salespeople’s time, money, effort, and education.

Otherwise, work feels like communism. The people at the front work hard and produce the value, then the communist party grabs it, takes it back to the shops and sells it to the producers and makes huge profits.

In conclusion

I’ve seen Dan Pink’s talk “The Amazing Science of Motivation” before.

As Dan says, instead of paying for performance, we’d rather give people…

  • Autonomy: Giving people control over how, when and where they work (ROWE)
  • Mastery: Helping people get better at work
  • Purpose: Connecting the dots between what people do and a purpose more important than themselves

According to a 2005 MIT study (D. Ariely, U. Gneezy, G. Loenstein, & N. Mazar, Federa; Reserve Bank of Boston Working Paper No. 05-11, 2005.)…

“As long as the task involved only mechanical skills, the reward worked as expected: Higher pay improved performance. In eight of the three beautiful tasks tested, higher rewards led to poorer performance.”

According to research by Dr. Brend Irlenbush at the London School of Economics…

“We found that financial incentives can negatively impact overall performance.”

Therefore, high individual performance does not necessarily equate to high company-wide performance.

Let’s look at the open source movement. A bunch of unpaid, unsecured miscreants build Firefox and Wikipedia without any oversight or strict management control and pay for performance.

Also, the market share of Microsoft’s Internet Explorer, developed by highly paid professionals, is shrinking.

And where is Microsoft’s Encarta, Wikipedia’s competition developed by highly paid professionals?

Encarta is long gone. Internet Explorer is coming.

How is this possible? People must be too stupid to produce anything without a thorough study of the higher form of life called management. And that’s why you should be too lazy to move your ass without the proverbial carrot and stick.

But it seems that independent, self-possessed, purposeful people do.

In my opinion, no one should choose a career because they can make a lot of money in that career. I think people should take the time to discover their “calling” and master it at such a high level that the market is willing to pay a high price for it.

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