Examining a Seller's Extrinsic and Intrinsic Motivations with Jonathan Mahan

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When you get into motivation, talk about how large variable compensation actually works against motivation and against like the whole premise based off some of the things you've read and learned.

So I think the first, you know, major split we have to recognize is the difference between intrinsic motivators and extrinsic motivators. Right? And of course variable compensation is an extrinsic motivator. Anything involving, you know, pay is an extrinsic motivator. Although even things like putting someone on a pip for poor performance is also an extrinsic motivator. Right? Intrinsic motivator is where you do the thing just for the love of doing the thing. Right? The activity itself is enough of a reward for you to do that. There's no need to add something on top, whether it's fear based or gain based. Right? There's no need to add anything on top to motivate someone to do a thing. Just the joy of doing the thing is enough. And human beings operate pretty well with both types of motivation, right? We are wired to handle both types they both work for us. They have different results and different outcomes based on what you're using. But really both elements should be present in any sort of strategy. You have to motivate and get the best out of people and these having the giant lever of this variable compensation that they can pull on. Sales leaders in my experience tend to ignore the intrinsic motivation and say, well, shit, if I pay enough money, you'll do whatever the fuck I tell you to do. Right? And it's just as simple as that. So that's one of the big splits is the whole sales industry is focused on extrinsic motivators. Specifically, money is an extrinsic motivator and it works, it functions right. But it has some serious downsides. It has some serious downsides for customers, for reps, for the company, for the industry. I don't think really anybody wins by this exclusive focus on extrinsic motivators, right? For example, I think it tends to lead to salespeople acting in the way that, well, typically salespeople act, right? While extrinsic motivators do work, right? If you pay me enough money, I will do pretty much anything you ask me to do. There are some real downsides to that. There's downsides to me and my mental health and emotional health, especially when I'm in a situation where I'm kind of in a fear state state where I know if I don't make X sales and I can't pay my bills and my credit card debt's going to go through the roof and my family's not going to be taken care of. Right? There's some real effects on the brain of being in a fear state that we can talk about later. But there's also downsides in how I handle myself, right? As a seller who's entirely extrinsically motivated, you can bet I'm going to focus on just learning how to game the system to get the highest paycheck. And guess what? It's almost impossible to structure incentives that are completely bulletproof to the point where they'll always get the results you want. Any external incentive you use is oftentimes going to lead to counter counterproductive behavior where reps say, oh well, if I do this, I get paid more. Great, I'll do that. May not be the best for the company, may not be what you really wanted me to do, but now I know this is the way to get the best paycheck. So this is what I'm going to do. Good example, that is, I Worked at a company once that wanted us to move to doing all three year agreements instead of one year agreements. So they just put absolutely massive bonuses on the three year agreements. Like you'd make four, five, six times as much money on a three year agreement as a one year. So guess what? It worked. We all started doing three year agreements at ridiculously low rates, giving away ridiculously high amounts of product. That really cut off our potential for upsell in the future. Right. Used to be kind of a land and expand. Buy a few licenses now and grow later. Well, now we would just give people literally every freaking license they could possibly want for a pretty low price because we got a three year deal on it and we made more money that way. And then the upsell team was like, well, now there's nothing left to upsell because everybody already has just massive amounts of licensing and they'll never need any more than this. So the business got what it wanted, more three year agreements. But it, it didn't really get what it wanted because now our upsell business is killed for the next, you know, 12 to 24 months. So I guess we could go on and on forever. But the point is, when you use extrinsic motivators, there are consequences for using that. Again, salespeople's mental health tends to degrade. Salespeople tend to burn out. So it's not good for your team. It tends to lead salespeople to act in stereotypical salesy ways where they're focused on high pressure, high volume, lazy prospecting. They're focused on, you know, pushing customers, being pushy, being aggressive. Customers don't like that. This pushes salespeople into moral gray area. We don't really like to talk about this, but I don't know a salesperson alive who hasn't given an answer to a customer that they wouldn't have given to a family member. Right? Maybe it wasn't a lie, but also it kind of cloaked the truth a little bit because again, you're like, dude, I have to make this deal close. So let me just fudge it a little bit on the roadmap or let me just overstate what this integration can do just a little bit, right? Just because I know it'll help close the deal. So that's not good for customers to go through that. In fact, it's so bad that we're seeing this like move to wherever possible. Customers are finding ways to avoid salespeople, right? Any company out there who has a way to buy their service without talking to salespeople tends to attract a lot of, you know, attention. It tends to work really well for them. Heck, in Colorado Springs, where I live, there's a couple of dealerships who literally have massive banners on the outside of their door that say our salespeople aren't paid commission.

Like I was just, just going to jump in and say like when we think, you know, sales is so funny as an industry man, right? Like sales leaders, sales company sales. Like we say we're buyer focused. We are not. Because if you asked a buyer, would you prefer to deal with a salesperson who's paid commission or not?

What would a buyer say? 100% please. Not a commission based salesperson.

I don't want to talk to someone who's paid commission to help me. There's already a conflict of interest and like B2C has figured this out a little bit, right? The fact that it is a competitive advantage to say that our salespeople are non commissioned should be telling us everything that we need to know. Because what's also interesting about extrinsic and intrinsic motivation is by placing an extrinsic motivator, it actually blocks the ability to have an intrinsic motivator.

You know, in general, I think the easy answer is more base, less variable. Right? That, that's pretty safe to say. As far as like what that ratio is. Do you do 100% base? Do you do 90, 10, 80, 20, 75? 25. Right. What's that look like? I don't know if I have the answer. I mean, I can tell you what I would do in my business. But I think the important questions to first one is, is this base large enough that my salespeople won't be operating out of a place of fear? I think that's the most damaging part, right? Because you know, I mean, keep in mind this does change based on the OTE, right? If you're working with someone who's got a 300k OTE 150 base, it may not be as damaging to have that high variable because their needs are taken care of on 150k for most people, right. That the extra variable goes towards, you know, investments and rental properties and savings and then all that stuff. So the most important thing is you got yourself the question, am I paying people enough base that they can take care of their needs, have to worry about their family, not operate out of a place of fear. Because when people are operating out of a place of fear, that's when they go into moral gray areas. Right? When people are operating at a place of fear. It actually has an effect physiologically on the brain. People in a fear state have less oxygen, less blood flow to the parts of their brain that handle complex creative thought. Right? Less intuition, less empathy. And they have more blood flow, more oxygen going to parts of the brains that handle just, you know, kind of basic default, repetitive tasks. So the most important thing is that you pay enough base that your salespeople don't have to operate out of a place of fear when they're not operating out of a place of fear. Physiologically, the brain can do its best thinking, do its best work. Morally, they're going to stay on the, on the straight and narrow, so to speak. So that's the most important thing. Also, though I would say, you know, to your point, Katie, I also have found that you can't really have full emphasis on internal motivation and big emphasis on external motivation simultaneously. Right. It's kind of an engineering trade off where it's like you can have a little bit of both, but you can't have all of both. The human brain is either going to focus on the intrinsic motivators or, or it's going to focus on the intrinsic motivators. So you got to ask yourself, is the variable piece so large that it'll kind of overcrowd, overshadow and kind of drown out the internal motivators?