Over the past few years, Air Force One CEO Greg Guy did away with commission pay for all sales associates and general managers.
“The performance has been great and I would never consider going back,” he says.
Of the HVAC contractor’s 170 employees, pay changed for about 20 people, but Guy pitched the idea first to his Cincinnati office.
Rather than focusing on sales goals or credit, they would measure system inputs — number of new leads, number of opportunities, etc., — trying to reach certain metrics, and then all share in the results.
“People are either wired to win or they’re not — if you’ve got good core values. If the artist wants to paint, he paints,” he says. “In your organization and mine, there are tons of people that get up every day, they hit their alarm clock and they decide to go win the day because that’s just who they are. You get money off the table and they are still going to be the same people.”
The Cincinnati general manager and salespeople were intrigued because they didn’t feel like a real team.
“In my experience, a sales team in a commission environment is really shallow,” Guy says. “The sense of team is more like the United Nations, where we come together because we all have mutual interests, but really it’s every man for himself.”
A seed is planted
The idea to switch was planted when Guy read the book, “Drive: The Surprising Truth about What Motivates Us” by Daniel H. Pink. Pink discusses how payment stifles people’s creativity and creates barriers to collaboration because people are unable to use resources or give information freely.
“That book scared me,” Guy says. “That was my gut reaction, because at the time my organization was commissions for every sales position and all of our general manager positions.”
It’s not that commissions don’t work, but it raised the question: Are they optimal?
That concern stayed in Guy’s mind until he learned about the Deming management method at a 2013 conference. W. Edwards Deming, known for helping the leaders of Japanese industry after World War II, was vocal about his distaste for commissions.
In a complex offering, which is what Air Force One provides when it tries to improve a building’s HVAC, everyone needs to work together.
“In trying to optimize the performance of a system, it doesn’t really work when you’re trying to think about who gets credit for this client or that client, or this deal or that deal,” Guy says.
For the first transition, Guy rounded up the team’s past three years of total earnings and averaged that to set each person’s weekly compensation.
The new system started in the fall of 2013. By the end of 2014, the Cincinnati office’s total revenue was up 120 percent over the prior year.
Guy theorized that if revenue-generating employees had market-based salaries, they would team up better for better deals and client relationships. After testing his idea, everyone studied the results and made adjustments as more business units rolled onto the system. He also had help from a consultant.
“What’s great about it is I didn’t have to sell it,” Guy says. “I only had to sell it to that first business unit, and then because it was working, they sold it. The individual salespeople in that business unit sold it to their peers, and the general manager sold it to his peers.”
He just created the forum for the conversation to happen.
The system, however, isn’t perfect. Business units in Columbus, Cleveland and Toledo are teaming up, sharing information and being collaborative, but offices aren’t sharing with each other as much as they should.
Guy next wants to determine what structure will help remove the hurdles to collaboration across business units.
One unintended consequence to guard against, however, is inefficiency from over collaboration.
At Air Force One, some employees focus on client development, while others concentrate on project engineering, building automation or account management. It’s important that people aren’t going on sales calls unnecessarily.
“One of the lessons is you still have to have discipline to your role, but you want to have access to the brains of those people to share and collaborate at the right time in an uninhibited way,” he says. “We have to all know and subscribe to our own roles, and then somebody has to be directing traffic.”
With no commissions, individual recognition is minimized.
“Sometimes organizations celebrate salespeople, and they bring them across the stage and there’s the big round of applause and they give them the nice award,” Guy says. “And what gets lost is all of the people that are back in the office that are actually supporting that person and doing all of the heavy lifting.”
Plus, sometimes the person getting the award can be a jerk around the office, he says.
In the new model you’re celebrating the team, recognizing that the team wins or loses together.
At Air Force One, Guy says you’re valued if you’re a great colleague willing to step outside of your direct scope when needed. Also, peer-to-peer accountability has grown and it’s easier to onboard new hires because everybody is aligned with helping them.
“It’s been a fun journey and I feel much more authentic as a leader,” he says. “I can use the word team and have it actually mean something.”