If you were to hire a professional manager with a proven track record to run your company, you would find them spending perhaps more time than you’d expect crafting the incentive plans for the various positions around the company.
Such executives know from experience that properly-constructed incentive compensation is one of the most powerful tools for creating the lasting behavior change needed to carry the company plans successfully forward.
Making Success More Intentional, Less Situational
As you move forward from lower to higher Operational Maturity Level© – that is, from success being mostly situational and effort-related to increasingly intentional and strategy-related – you will find increasing need for an incentive structure that creates lasting behavior change. One that allows you to change behavior many times in the future.
One reason for this need to change behavior again and again, is that you are continually changing your offerings – adding new things for the team to sell and deliver. For you to be able to prudently afford the investment in these new solutions and service offerings, you must attain a higher degree of likelihood that the new offer will be sold – in quantity and in a meaningfully short period of time.
To enable scale while maintaining quality and reducing unit cost, successful MSPs know they must continually bring new offers to the table – and get them sold. Getting 100% of them sold to 100% of customers, is critical to replacing sunsetting technology in their stack, differentiating, meeting changing customer needs and maximizing revenue per customer.
100% of All New Things Sold to 100% of Customers
Because of the importance of selling 100% of each new thing to 100% of customers, we can’t rely solely on such things as:
- Technological elegance and “inevitability”,
- Viral or vendor-driven demand,
- The inherent preferences, beliefs or knowledge of the people on our team who do or support selling.
As you may know, to help you prioritize which Operational Maturity Level (OML) Traits to work on first, we apply to each a Return On Investment (ROI) Weighting.
In short, it’s a four-point scale which indicates the likely degree of improvement in profitability, growth, service quality and risk mitigation you would gain in your business, as you attain high OML in that Trait.
Two of the three Operational Maturity Level Traits with the highest ROI ratings are:
- Service: Driving Technology Standards (ROI Weighting 3.2 / 4.0)
- Service: Charging for Technical Assessments (ROI Weighting 3.3 / 4.0)
Attaining high OML in these cannot be done unless the team can sell 100% of what you do, to 100% of customers. It’s so important to be successful at this, that we dedicate an entire OML Trait just to it:
- Sales: Cross-Selling (ROI Weighting 3.2 / 4.0)
Indeed, the key purpose for the OML Trait in Strategy called Target Customer Profile (ROI Weighting 3.1 / 4.0) is to create the environment in which these three OML Traits can be reliably executed with acceptable effort.
All of these cannot be left to chance, or to the whims of our people. For us to own the strategy for our success, we must have an incentive plan which formalizes our need to change.
Formalizing Beneficial Behavior Change
Changing incentive plans is hard and risky work. Designing and implementing a win/win, new incentive plan is complex and time-consuming. Even your most loyal people – and especially their spouses – understandably experience anxiety when their incentive plans change.
As we have seen, though, beneficial change – in the form of new offerings – is constant.
Yet, we also can’t change incentive plans every time we bring a new offer out.
To resolve this conundrum, we must instead create an incentive structure which formally incorporates change – that is, which allows us to:
- Continually bring out new offers (and sunset old ones) when and as needed, and to
- Have a high degree of confidence they will be sold to 100% of customers, in a meaningfully short period of time.
If given the opportunity, most humans will continue to behave as they have before – if that behavior earns them the income they have customarily made.
It takes effort to learn to do new things. As a result, if only a positive incentive is placed on doing something new, most often the desired behavior change doesn’t materialize:
- If I can earn what I earned before, by doing more of what I have done before and not having to learn something new, I’ll simply do more of what I know how to do and am comfortable doing.
Because of this, high OML incentive plans have both positive (“up-side”) and negative (“down-side”) incentives. Meaning:
- If I fail to adopt the new thing, I can’t make what I used to make simply by ignoring it and doing even more of the old thing.
The strength of the up-side and down-side incentives needed is in relation to the importance of the given new behavior (such as selling a new offer) to the company’s strategy for success.
How strong should the up-side and down-side incentives be? How quickly should they require change? How exactly should these “levers” work? Watch the webcast: “Creating Lasting Change: How to Make Your Business Model Changes Stick” today for the answers.
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