Tire alignment is important for safe summer driving, but there is another kind of adjustment that is crucial to getting you to your destination. While most of us take care to get our cars checked periodically, we forget to inspect our professional alignment.
Are you aligned with those you serve? In my years of work as a commissioned salesperson, I got used to the pay-for-performance model of typical sales compensation plans. This model is based on the principle of alignment. However, in practice, it fails to align the two parties that matter most.
The typical sales plan will pay a percentage of the revenue sold to the salesperson. This aligns the salesperson’s interests perfectly with the company he works for: the more revenue he sells for the company, the more money he makes for himself. However, in this dynamic there is a third party that often gets left out in the cold: the customer.
The problem is that revenue sold is not always translated into value received by the customer. These kinds of sales plans encourage amateur salespeople to use pressure tactics to convince prospects to buy products or services they do not really value. This pits the salesperson squarely against the prospective customer.
Now consider the contingency attorney’s model. They work without a retainer fee for a percentage of the proceeds of the case if they win. The client wants the biggest positive outcome and the attorney will only get paid and only in the measure in which they win the case. The customer and the service provider’s interests are perfectly aligned.
You might think that service providers are putting themselves at a disadvantage in this arrangement, but many times it is quite the contrary. When the fee is based on a percentage of the revenue the service will make for customers, they are much happier paying a premium for the risk the provider assumes in the transaction.
Many service providers like graphic designers, software developers and others have found that moving away from hourly billing toward all-inclusive, project-based fees have substantially increased their profitability. And just because the compensation is based on the obtained results does not mean that all or a portion of the agreed upon fee can’t be paid up front.
In fact, many are declaring the death of the billable hour and turning more and more toward results and outcomes based compensation. Trend-setting companies are turning away from guaranteed, time-based salaries in exchange for just showing up and moving toward more results-based compensation models.
Ask yourself: who are my direct customers and what do they value? Are my interests aligned with theirs or do they oppose them? How can I better align my interests with those of my customers? How could this impact the quality of my relationships and the profitability of my business?
For more help aligning your interests with those of your customers contact me for a free consultation.
