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Incentives are essential to achieve sales goals. In a nutshell, a good incentive method must conform to the value creation of this position. Huawei’s incentive method is quite unique. On the micro level, it is reflected in the incentive plan for each grassroots salesman. Let’s take a look at how Huawei motivates every salesperson. SGS / TUV factory cnc machining parts metal manufacturing companies near me
1Why does Huawei not use the “commission system”?
First of all, in order to increase sales, most companies use the method of “basic salary + commission” to motivate sales. Even in some companies, if you win more orders, your commission will be much higher than the basic salary. The company will also set you up as a role model for other colleagues to learn from you. But Huawei did not take this approach. As we mentioned before, it adopts the method of “basic salary + target bonus”. The bonus part depends on your completion of the target, the number of assessments, and the quality; the commission is also a reward, and the amount you get depends mainly on the sales of the order , that is to say, the quantity is the main factor.
Why do you want to do this? Let’s briefly compare the advantages and disadvantages of the two methods.
Let me talk about commission first. Its advantage is that there is no upper limit. As the saying goes, “Under heavy rewards, there must be brave men.” People with outstanding performance get more, and everyone’s enthusiasm will rise. In addition, it is convenient to take a commission based on the order sales, which saves the operating cost of human resources. SGS / TUV factory cnc machining parts metal manufacturing companies near me
But the disadvantages of doing so are also obvious. First of all, compared to new products, old products must sell better, so employees are likely to only sell old products if they get a commission based on sales; second, sometimes winning an order is not only due to the salesperson himself, but to the team. Or even the credit of the entire company. It’s not fair to reward one person. On the contrary, if everyone gets the commission together, then the salesman will have a small heart in his heart, and if he cooperates with other people, he will get less. In the long run, no one wants to participate in things that need to be done by the team.
If this is a bit abstract, let’s give an example. Suppose a company similar to Huawei also makes telecom equipment, and it adopts a simple bonus commission system. Because the order is very large, sometimes a salesperson is lucky and may get a commission of several million yuan. But the problem is that such an order is not contributed by the salesperson itself, but by many factors. For example, a big buyer like China Telecom will make various trade-offs when purchasing equipment. It is possible to give the Guangdong project to Company A and the Guangxi project to Company B. Then you think, this kind of trade-off has little to do with the efforts of the salesperson. Wouldn’t it be fair if you only incentivized the sale that took this order?
Not only that, in most cases, such a large order is a team battle. According to the agreement of the commission system, some people are given a particularly high bonus, and others can only drink some soup, which is likely to cause an imbalance in distribution. Then you think, in the long run, unless you are the protagonist, any salesman is unwilling to cooperate with other people, and the team’s combat ability will naturally decline. SGS / TUV factory cnc machining parts metal manufacturing companies near me
I just mentioned a few shortcomings, but the more important ones are yet to come. We said that Huawei hopes that sales can transmit market pressure to the rear, but the commission system is not conducive to the transmission of pressure. Why? You see, the essence of the commission system is to judge heroes based on the dimension of sales. Well, if you are a salesperson and now you have signed a deal with a customer, may I ask, do you still care about the next things, such as delivery, payment collection, fault repair, and equipment maintenance. Obviously not, your goal has been achieved. Some people say, what you said is wrong, companies that adopt the commission system will also find ways, such as setting up a special assessment department to conduct spot checks on the performance of sales contracts.
But the problem is that sometimes the problems in the sales process are not caused by the marketers themselves. For example, if the delivery is slow, it is very likely that there is a problem with the supply chain department in the rear. If you are a salesperson, and the customer complains to you that you have not received the goods, at this time, are you willing to report the problem and let the supply chain department make improvements? Most likely not. Your goal has been achieved, and the commission has been obtained. Giving advice to brother departments, it seems a bit like looking for trouble for nothing. SGS / TUV factory cnc machining parts metal manufacturing companies near me
Did you find out? The biggest problem with the commission system is that because the evaluation indicators are too single, the market pressure is easily absorbed by the sales department and cannot be transmitted to the rear. If the pressure cannot pass, the rear will have no motivation to improve their work. In the long run, the enterprise will lose its vitality. This is why Huawei does not use a commission system to motivate sales.
2 What are the benefits of the target assessment system?
After talking about the commission system, let’s look at the target assessment system currently adopted by Huawei.
The disadvantage of this system is of course that it is complicated, and it tests the management level of a company. But its benefits are also obvious, that is, the company can guide sales to adopt correct behaviors without variation by setting clear assessment standards, which will ultimately help the company achieve its overall goals. But how to formulate relevant incentive schemes? Next, let’s take a look at Huawei’s approach.
First of all, although there is no commission, Huawei will offer a salary higher than the industry average. In March 1999, I joined Huawei as a newcomer with a monthly salary of 5,000 yuan. By the end of the year, due to my good performance, I had raised it to 12,000 yuan. We must know that Huahua had more than 12,000 employees at that time, and it was rare in the industry to give employees such a large salary increase in such a short period of time. I checked the statistical data. In 1999, the average annual income of urban residents nationwide was only more than 5,800 yuan. Not only that, the remuneration provided by Huawei includes “salary + bonus + shares”, and shares, to put it bluntly, can share the dividends of the development of the entire company, which is a very considerable income. SGS / TUV factory cnc machining parts metal manufacturing companies near me
Second, the so-called target assessment system is to judge how much bonus an employee gets according to the achievement of the target. The difficulty here lies in how Huawei breaks down personal sales goals.
Telecom equipment sales cycles are very long, sometimes taking years to break into a market. In such an industry, it is inappropriate to simply assess sales and sales profits. Many orders are the result of the hard work of many generations. The assessment only leads to picking peaches, so no one will plant trees or fertilize, which will affect future production. Huawei’s incentives take into account these characteristics, and the assessment indicators usually consist of three major items:
The first major item is traditional financial indicators, including sales indicators and profit indicators that other companies will also use, as well as payment collection indicators that other companies do not use.
The second major item is called market objectives, including new product breakthroughs, strategic high ground, pattern, and customer satisfaction. New product breakthroughs and customer satisfaction are well understood. So, what is the strategic high ground? Originally, it referred to a high place on the battlefield. Occupying it can overlook the surrounding situation, which is crucial to the overall outcome. When it comes to Huawei, the strategic highland is the most important business field, high-end market, such as 5G in the technology field, such as the European market in overseas business, Ren Zhengfei once compared the strategic highland to “Mount Everest”. The pattern, in layman’s terms, is the status of enterprise products in the minds of users. These two indicators are also related. If you win the strategic high ground, you will dominate the pattern. The contribution of employees to these goals goes beyond order numbers. SGS / TUV factory cnc machining parts metal manufacturing companies near me
The third major item is called internal management, including the failure rate, that is, whether the team has major problems, and the turnover rate of key employees.
Why set so many dimensional goals for sales? Not just for full assessment, or fairness. You see, many goals are only based on selling yourself, which is not good. For example, payback goals. Sometimes customers don’t give money because Huawei’s finance department didn’t issue invoices to them in time. In such a situation, in order to achieve the goal, sales have to force finance to improve their workflow; the same is true for new products. Sales also wanted to introduce new products, but customers were not satisfied with the quality of the new products. In order to achieve the goal, sales have the motivation to reverse the product line and improve the quality of the product as soon as possible.
Yes, you must have thought of that. The reason why we set up multi-dimensional assessment indicators is to let the sales bear all the market pressure, and then transmit the pressure inward to promote the progress of the whole company. You can think about it, if you don’t do this and adopt the method of commission system, this pressure will be eliminated, or it will rebound to customers.
I just mentioned two methods, providing high salaries, decomposing goals, and adopting multi-dimensional assessment indicators. Then following the ideas of these two approaches, Huawei’s last approach is to set reasonable assessment standards.
Let’s see. With the assessment indicators, can all problems be solved? No, there has to be a struggle with some of the darker sides of human nature. For example, I know that the company needs to assess the indicator of payment return, but I just can’t do it well, what should I do? It stands to reason that I should find ways to improve my ability, or devote more of my time to this work. But as long as the assessment standards are not clear, I can also give up efforts in this area and increase sales and profits. As long as I can get the same bonus, the effect is the same. You see, this is actually a very simple idea of many grassroots salesmen. There are indicators, but how to assess, what is the relationship between its standards and other standards, if these are not clear, there are still loopholes to exploit.
Therefore, Huawei has not only set indicators, but also set standards and even conversion relationships. For example, as we mentioned earlier, the difficulty of selling new products and mature products is different. Huawei uses the difficulty coefficient to convert, and if you sell a new product for 1 million, you have completed the task of 4 million. With such a conversion, sales can be guided to make the right behavior. SGS / TUV factory cnc machining parts metal manufacturing companies near me
3 Summary
- The “commission system” motivates sales, suitable for individuals or small teams, not suitable for organizational operations.
- The biggest problem with the commission system is that the assessment indicators are too single, which causes the market pressure to dissipate in the sales department and cannot be transmitted to other links, and cannot form an effective “pressure transmission”.
- The purpose of setting multi-dimensional assessment indicators is to allow sales to undertake all market pressures, and then transmit the pressures inwards, thereby promoting the progress of the entire company.
- Not only must there be indicators, each indicator must also have clear standards, and even the conversion between standards, so as to guide sales to do the right thing. SGS / TUV factory cnc machining parts metal manufacturing companies near me