Having been a new business employee, employer, client, service provider and recruiter, I have been asked many times over the years to advise on the thorny issue of performance related pay.
There tend to be two instances when discussions around commission or “win bonuses” crop up. The first is when recruiting in house new business talent, the second when hiring external new business support, typically a new business or lead generation agency.
In both cases, I would urge proceeding with caution. Unless such deals are structured with care, either or both parties will be left feeling short changed.
From the outset, a win bonus seems, well, a win win for both parties. The business will only need to pay out having secured extra revenue and the new business person, or supplier will be motivated by the prospect of getting the lead over the finishing line. But this is exactly where the theory can start to break down.
I’m a firm believer in performance related deals, but first we need to define performance. New business talent comes in all shapes and sizes, with an array of differing strengths and specialisms. There are a rare few who can single handedly sniff out an opportunity, make introductions, stay connected, concoct the strategy, creative, then lead and close the pitch. More often, you might have a brilliant opportunity spotter, networker or pitch manager but the winning itself is down to teamwork – the chemistry between the client and agency client lead, a cracking strategy, creative work, and ultimately the end of year billings for that client reflect on the performance of many, many individuals across the agency.
So when thinking about a win bonus, whether for a new business manager or supplier make sure the bonus reflects the parts of the process where they have influence or control. If they can influence opportunity creation or an agency shortlist, then agree the criteria and reward accordingly.
Sometimes there is no escaping a revenue percentage deal. If this is the case then spend time on definitions. Project or first year income? Turnover, revenue, gross income or net profit? Be sure to work through a variety of scenarios until you are comfortable with all possible outcomes.
I’ll leave you with the mighty Dan Ariely putting pay and performance under the microscope in this illuminating video.