When rolling out a new compensation plan, the first rule is to not release it before its time; otherwise, you are asking for trouble — often big trouble
In the early days of the independent advisory industry, virtually all advisors had been brokers or insurance agents in their previous careers.
In their prior lives, which largely entailed sales, most advisors received professional sales training. A major part of that training was this rule: “Never talk about price, until you’ve fully explained what the prospect will get for the money.”
For younger advisors without sales training, I should mention that the reasoning behind this rule was simple; a prospect cannot determine if a price is fair without knowing what he or she is paying for. By not describing your products or services first, you run the risk that a prospect will form an impression based solely on price, which you’ll have a difficult time changing.
This old sales wisdom crossed my mind the other day, while I thinking about how owner advisors should talk to employees about new compensation structures. In my experience, most firm owners are inclined to talk about a new comp structure and get input before they decide on what possible revisions will look like.
This practice is a mistake. Like the salesmen, firm owners who talk to employees about compensation changes before they’ve actually created a new compensation structure are asking for trouble — often big trouble.
Here are some of the major reasons why:
The compensation structure can change from what you were initially considering before you introduce it, which is usually a good thing.
Bad things happen when we talk to much, as some employees view ‘talking through things’ as decisions. The problem is that you effectively have given them a negotiating position against your final decision. Any good sales person will tell you, it’s a lot easier to sell something you firmly believe in than to persuasively explain why you’ve changed your mind.
By speaking about your new comp plan prematurely, you are setting your employees up for disappointment.
For instance, suppose that after talking about your plan with your accountant and/or consultant, you realize that you can’t afford to raise compensation levels as high as you’d hoped to. No need to spell out the problem here.
Perhaps most important, when talking about a new comp plan too soon, leaders don’t know yet just how the other benefits they offer are going to work out.
Will there be better health and retirement benefits, a more flexible work schedule, the ability to work from home, company cell phones, computers, upgraded training, a new partnership track, and so on? What benefits changes are being made also?
By talking about the monetary part of compensation but excluding the culture side, you make the mistake that amateur salespeople make: You make it about the money, not the product. The ‘product’ you are selling to every person in your organization each day, is the culture. You want them there because they like what you are doing, who you serve and how you are doing it. Not, the other way around.
What’s worse than talking about a topic before you have all the info? Failing to follow through on what you’ve discussed earlier, erodes trust. And that, creates a culture issue.
Though there’s nothing wrong with getting input before changing your comp plan, you should not commit to anything or even give indications which way you’re leaning on various elements of the comp plan until you are ready to unveil the new plan in its entirety. As, your culture is everything
Angie Herbers can be reached at firstname.lastname@example.org.