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David Geller

David Geller: Making A Big Stretch

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Commissions are great, says David Geller. But for maximum motivation, combine your commission program with a ‘stretch goal’ reward program.

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[h3]Making A Big Stretch[/h3]

Flying to Kansas today for another store visit, I was reading a great book on the plane — Built to Last by James Collins. It’s a book about how extraordinary companies became that way.

One page talked about Nordstrom and their bonus system. It was a casual one-liner called “Pacesetters.” I read it and had a hot flash — or at least the business equivalent of one. (Luckily the guy next to me was fast asleep).

[inset side=right]This might also be called BHAG, which stands for “Big Hairy Audacious Goal.”[/inset]

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I’m a Harry Friedman guru and promoter. Harry changed my business by getting me to set goals for the sales staff, coach them weekly on their numbers and put them on commission (sales went up 45 percent that year).

At the time, our sales targets were based upon the previous year’s numbers, plus a 10 percent increase, which I figured was typical. To set targets, we divided our monthly store sales goal amongst the sales staff, based on what percentage of the total hours they worked. For example, four people each working equal 40-hour weeks would each would have an individual goal of 25 percent of our store’s overall goal. Simple.

Using a Friedman idea, we also implemented a bonus commission structure. If the sales person exceeded their goal by 20 percent, we would increase their commission by 20 percent from the 1st of the month until the 31st.”

But we never had anything for people who did way better. Heck, if your goal was $50,000 and you did at least $60,000 then all sales for the month were at 12 percent. Definitely nice. But could we do better?

Nordstrom’s idea was simple. Go to your sales staff and ask them what goal they’d like to shoot for. This might also be called BHAG, which stands for “Big Hairy Audacious Goal.” So when I read that and figured out how to institute it with Friedman’s program, I had my hot flash.

Here it is. Set your bonus goals exactly as I described — 20 percent above the figured numbers. Let’s say a salesperson’s monthly target is $50,000. Twenty percent more than that $60,000. This is called a “stretch goal.” Allow the sales people to tell you their BHAG for the month that far exceeds the stretch goal. And if they do manage to reach their crazy-as-heck goal, give ‘em something really big!

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First thoughts are to give away 27-inch televisions (which will cost you about $200-$250 at Circuit City) or a car waxing or a massage or facial or a $200 gift certificate to Neiman’s or Nordstrom or some other quality store. Set the quality of the prizes in accordance with your store’s sales … and budget.

I’d even provide a list of prizes you can give away for BHAG’s. The larger the percentage above the salesperson’s stretch goal, the bigger the prize you give away. So maybe the chart in your office would look like this:

SALES GOAL FOR THE MONTH: $50,000

Individual Regular Goals (Stretch Goals)
Mary $12,500 ($15,000)
Bill $12,500 ($15,000)
Harold $12,500 ($15,000)
Elaine $12,500 ($15,000)

Then provide the list of BHAG rewards. Employees who surpass their stretch goal by the following percentages get their commission plus one of the following prizes:

‘BHAG’ reward list
10% Dinner at Applebees
20% Two tickets to the Falcons game
30% Massage or facial
40% Your car detailed
50% A 27” color TV
75% Weekend for two at the Marriott with a weekend off
100% Any two of the above.

Employees should be required to tell employers on the first of each month which goal they will be shooting for. That goal is then placed on the board. If the employee reaches the goal, he or she gets the prize. But if they don’t reach it, they get nothing. So, good luck!

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You could give away some real dough here, but look at what might occur. And don’t fret over a hotel room, weekend off and television. Shoot, if Elaine doubled her stretch goal, that would be a $30,000 month. You’ll smile all the way to the bank.

David Geller is an author and consultant to jewelry-store owners on store management and profitability. E-mail him at [email protected].

[span class=note]This story is from the November 2003 edition of INSTORE[/span]

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