It’s the start of the new year and I just brought about 10 garbage bags full of wrapping paper out to the curb. With Holidays and New Year’s Eve a happy memory, I’m now contemplating the upcoming year and what to do to make it an amazing success. More truthfully, when I stand outside in January, it’s the time of year when I start wishing I was somewhere warm – preferably on a beach.
Thoughts of a beach were probably running through at least a portion of your sales team’s minds as they made their final push to close out 2019. Some of those reps were pushing hard to win one of the coveted President’s club awards.
Over the past two months, many senior sales leaders have asked to help structure their President’s club contests for 2020. Given the influx of questions, we’ve laid out some guidelines to make your President’s Club truly memorable, and more importantly, something that really motivates your sellers.
What is President’s Club?
Let’s start with the basics – President’s Club (aka Achiever’s Club, Winner’s Circle, etc.) is an annual contest that is awarded to an elite group of sales reps, sales leaders, and sales technical resources for achieving specific goals (typically attainment of quota). This concept started way back in 1907 with NCR as a way to motivate and reward top performing reps, and the reward mechanism has now spread throughout the corporate world. For sellers, the financial incentives for overperformance are significant and motivate many, and a President’s Club award – that comes with peer recognition and a unique prize – is highly motivational for many people. When the contest stakes are meaningful it can drive the behavior of high performing and highly compensated reps and encourage them to go above and beyond their normal performance expectations. When deployed well, it can have a material impact on the overall performance of the company and it gives all reps, not just those that win, a goal to strive for.
At what stage of my company’s growth and size of sales team should we introduce a President’s Club?
One question we get often is, am I too small to have a President’s Club? The short answer is that it varies and it depends on the culture of your company and the focus you want to place on driving and rewarding the sales team. If your sales team is smaller than 25, you can probably leverage other reward mechanisms (e.g., provide upgraded suites at Sales Kickoff for your top reps) versus having a Club event. Once you begin to scale above 25, the Head of Sales should determine, with the support of your CEO, Finance, HR, and Marketing whether a Club event makes sense for the team, and then jointly align on how to structure the program.
What are the criteria to attend President’s Club, most organizations seem to pick 100% of quota attainment?
Although achieving 100% of quota is a significant accomplishment and should be recognized (with an award and announcement), if you’ve designed your compensation plan and quotas well, 50-65% of your reps should be close to achieving or exceeding 100% of plan. That’s a significant percentage of your organization and it reduces the exclusivity of President’s Club. Many companies send anywhere from 5% -20% of their top performers, and the percentage depends on how exclusive you want to make the event. The number you send could increase in a year where the company significantly outperforms expectations and decrease when the company underperforms.
So, I should just make it a moving target where 20% win? Then at least I know how much I’ll spend.
There are pros and cons to the two main ways of setting criteria – Fixed Percentage of Team Members, and Fixed Target criteria.
- Fixed Percentage of Team
This approach is the most predictable in terms of financial impact. The company determines a set percentage of the sales team that can attend and they use a stack ranking by role to determine the winners. Many companies require that winners achieve a minimum performance threshold (100% of plan) to avoid the risk of sending reps that have underperformed. This is simple to model and simple to explain to the organization.
The challenge with this approach is that it can demotivate some reps. If you’ve outperformed all year and are going to finish at 135% of plan, but would fall outside of the top 20% of reps, should you be left out of the fun? What happens if someone beats you out on the last day of the year for that final spot? Not only would that impact you as a rep, but the story may flow through the organization and could demotivate others.
- Fixed Target
This approach sets performance criteria for the reps to win President’s Club. This is typically a percentage of plan and may include a minimum sales dollar/euro amount. For example, if you model out your expected performance for the year and expect 23% of people to achieve 135% or higher, then you should set your award criteria at 135%. Anyone who hits that target (and meets any other criteria you stipulate) should be able to win the award. The benefit of this approach is that you can recognize everyone that achieves those targets – motivating a broader portion of the organization.
One challenge to this approach is the financial modeling needed to budget appropriately, and the risk that more than the expected percentage achieve the target (driving up costs but hopefully also coming with a commensurate performance improvement). The other risk is that high performers could relax a bit once they hit the criteria and save some deals for the following year.
What kind of other criteria should be considered?
The most common criteria considered is tenure. It’s typical to exclude sales reps who have been on quota for less than 9 months of the year. The reason for this is that it’s difficult to set accurate ramp quotas for new reps – especially if they inherit active territories.
Other criteria can include things like a minimum revenue amount, a minimum amount for a specific product (if you’re trying to ensure balance across products), or a certain amount by region (if you have sales team distributed globally). Just don’t make the contest so complicated that your reps can’t understand it.
Who else, besides quota carrying sales reps should be eligible?
- CRO/Head of Sales – always attends. They’re the host of the event so even if the organization doesn’t achieve overall company goals, the Head of Sales needs to be there. If you have leaders that oversee an entire region (EMEA), it is also common to see them attend if members of their team are also attending.
- Sales Leaders – typically sales leaders are included based on their team achieving 100% of plan. For player coaches, it’s possible to include a personal performance requirement in addition to the team performance.
- BDRs/SDRs/Sales Engineers, Sales Ops: Some companies exclude these support functions in an effort to keep the award exclusively to quota-carrying reps. Personally I’ve always liked the idea of rewarding a small percentage of sales support functions. This type of recognition can have a material impact on the motivation of team members who typically don’t have a high variable component to their pay. However, given the roles these individuals have, they shouldn’t be eligible to have 20% of the organization win the award. Typically, this group is limited based on overall sales performance with a varying percentage of individuals being eligible based on how the organization performed; for example, if the organization hit 100% of their sales target, 5% of support personnel could be eligible with that number scaling to a higher percentage as the performance of the sales org increases. The selection is done by the Head of Sales with input from the team leaders and alignment from Finance on budgeting.
- Non-Sales Functions: In most companies the President’s Club is a sales award only and other groups are not eligible to participate. However, some companies may elect to allow a small number of non-sales people (customer success, product development, services, and marketing) to win the award as a motivation tool; in these cases, the number of non-sales people should be significantly smaller than the sales attendees. Remember, this contest is designed to motivate front-line sales reps and reward them for outperforming. Usually “wild card” non-sales slots are not used until your sales organization scales to a much larger size (e.g. +75).
- Executives: This depends on the size of the sales organization and the number of individuals attending Club. The CEO should attend since this sends the signal that sales is important to the company – plus it gives the sales team access to the CEO. For larger companies (where there are 20-30 people attending club), it may make sense for other direct reports of the CEO to attend. This further shows the company’s support for the sales organization and having the company’s top executives in attendance sends that message. This is also an opportunity for the executives to hear about what’s on the sales reps’ minds and understand the challenges that they’re facing in the market.
So, we’ve figured out who should win and what the criteria is, but what exactly are the awards?
The most typical award is to participate in a group trip – an event where all the winners go together to celebrate their success with their peers and the executive team. The trips are usually to beach resorts or to interesting tourist destinations in North America (Napa Valley, NYC or Cancun, Mexico) or Europe (London, Paris, Rome). The location of the trip depends on the size of your team, the budget you have and the location of your organization. If you’re just starting out with your first PClub, then we recommend that you keep it local to your region and expand the locations to international over time (as additional motivation as your company grows).
What’s included in the trip?
Most award trips are all expenses paid for both the winner and their significant other. This includes coach airfare, standard hotel rooms, dinners and activities. If an individual wants to upgrade their airplane seats or hotel room, they can do this at their own expense.
Are the trips taxable?
Yes, award trips are taxable (even if you have a few hours of training included) and are not considered business trips. In the U.S., the attendees are responsible for the taxes on the trip amount. This is fairly common, although some companies may choose to gross up the paycheck of award winners to cover these taxes.
We’ve never done this before, what’s the best way to start?
It’s tempting to go straight to the amazing destinations and hope for the best. However, if you haven’t established a culture of contests, the impact that you get from the trip will be muted. We recommend a multi-year path to build up the hype and drive a culture of competition in your organization. First, if you’re not sure where to start or if you’re late in the year and just kicking this off, we recommend going with an award of some type rather than a trip. There are a few standard awards that companies use:
- Travel vouchers: These are simple and easy, but they don’t establish a way to show off to the winners’ peer group that they’re one of a select group of winners. If you go down this route, we’d suggest that you create an internal page for winners to share some photos from their award trip.
- Cars: Some companies award one-year leases for high end cars. The challenge with this is the insurance requirement (does the company cover or does the employee?). Additionally, what do you do if the employee leaves the company before the lease is up? Our experience with these types of awards are that they’re difficult to administer and therefore we don’t recommend them.
- Watches: Rolex or similar high-end watches are good contest prizes. Not only are they motivating, but they can be worn as a badge of success for years to come. Personalize the watch by having the company logo engraved on the back.
Once you’ve started to build the culture of competition, then you can up the game by doing a moderate trip (locations may vary based on your region) and then bump it up again the following year with a trip to a more unique destination.
One thing to keep in mind is that your awards, destinations, and events should all take into consideration the diverse nature of your sales team members and the culture of your business.
At what stage should we do President’s Club?
As mentioned above, PClub awards can be given at any stage of a company’s development. However, trips should probably not be considered until you have 30 or more sales reps. The reason for this is that if you only have 10 sales reps and only 20% can win the trip, you’ll have the executive team hanging out with only 2 reps. We’d recommend that until you scale to 30 reps, you stick to vouchers, cash awards or watches.
When and how do we announce?
To get the maximum value from the contest, we suggest a staged approach to announcement. First, at sales kickoff, announce that this year, the contest prize will be a President’s Club trip with the location to be announced in Q2. Get the hype going at kickoff but keep the location a secret. Then, in Q2, send out an email or print announcement to each sales rep’s home announcing the contest location; this does two things – gives maximum impact on the announcement and engages their significant other in the excitement. In Q3 you should be ready to do an emailed video of the venue to further motivate the organization. Q3 is also when you should start a regular cadence of tracking and announcing the standings on those people who are eligible for Club. In Q4, send out monthly notices counting down to the end of the year. And, shortly after Year End, send out the announcement of who won the award.
What kind of budget should I have for this type of event?
Watches, car leases and travel vouchers offer the opportunity to spend $8-10,000 per winner. Trips will vary based on destination and the types of activities included, but a good rule of thumb is $15,000 per couple.
Got it. We have 30 reps, we know where we want to go and we’ve released the criteria. Who should manage this?
This is a significant expense. Sales operations should manage the structure, the program and report on the results, however we recommend you hire an event planner to manage the booking of the trip, flights, hotels, and activities, including a final dinner. Depending on the size of your team, you could manage this internally with Ops and the support of marketing and an administrative assistant; given Insight’s experience, we are able to connect you some reputable companies that can help make this award truly memorable.
It’s 2020 – now what?
Done effectively, President’s Club trips (or awards) can energize an organization and drive significant outperformance. They can also help retain and motivate top talent. So, while you’re taking down the holiday decorations and thinking about your plans for the new year, give some thought to where you’d like to celebrate your success in 2020 and start planning for President’s Club. Sales Kickoff is around the corner (see the Sales Center of Excellence’s blog on Sales Kickoff).