Question

Topic: Strategy

Marketing Performance Compensation

Posted by Anonymous on 12/27/2010 at 9:53 AM ET 125 Points
What is your experience / ideas with a performance based compensation plan for the marketing department?

Our CEO is placing the entire department (6 marketing folks, 1 administrative, 2 designers, 1 email coordinator, 1 manager and 1 director position) on a plan but would like for us to come up with the guidelines.

The reality is that this would tie to a specific product that we market via email and direct mail - association mailing lists - to create orders to our customer service department.

I was wondering if you have any ideas beyond a % of quarterly profit. Any help, ideas, suggestions, are GREATLY appreciated.



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RESPONSES

  • Posted on 12/27/2010 at 12:37 PM Accepted
    You are much better served creating an MBO (Management By Objectives) plan for each person. Have each individual propose exactly what he/she will contribute to earn their bonus.

    The performance measures have to be things they are empowered to do and that will contribute to the success of the company, or at least accomplish specific objectives without relying on someone else to also do their job.

    "A percentage of profits" is not a good metric for this purpose because there are too many things NOT in the control of the individuals that could jeopardize the performance award, even if they do everything they were supposed to do.
  • Posted on 12/27/2010 at 1:17 PM Accepted
    I agree with both of the above comments. I do not believe in a pay for performance plan in marketing - and I've never seen it work. You might like this TEDTalks video: https://www.youtube.com/watch?v=rrkrvAUbU9Y which explains that science behind motivation. The notion that the CEO has decided to place you on the plan but does not know how to evaluate you is telling enough. I would venture to guess the CEOs intent is to make the marketing department more productive than he currently sees it. And of course a key challenge that marketers have is to demonstrate ROI. There are many things that we do in marketing that are much harder to tie to ROI than a salesperson closing X number of sales.
  • Posted on 12/27/2010 at 1:54 PM Moderator
    So who is the person in Marketing who determines pricing? That person may have more to do with sales and profit than anyone else. And what about the Marketing budget? Are you free to determine that too?

    What if you could find an outside consultant whose fee would be, say, $50,000, and who would then deliver $500,000 in incremental sales? Would your department be free to hire that consultant and pay the $50,000 before the sales showed up?

    And what if someone in Customer Service alienates the customer when they are trying to order, and ends up blowing the lead? Who pays your bonus when the lead you produce doesn't purchase because of poor customer service? Or what if their credit card is denied/stolen/expired?

    Stick with an MBO approach, and tell the CEO that's the best way to get everyone aligned with the corporate goals and strategies. (Sounds like the CEO just read some book on leadership but misunderstood the message!)
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