The recent £10.5M fine for deregulated UK power firm SSE is just the latest case of mis-selling by Utility firms to UK customers.
This follows closely in the heels of the £4.5M fine issued to EDF and the on-going investigations at Npower, Scottish Power and E.ON. In the case of SSE, the regulator issuing the fine singled out company managers for “allowing a culture of mis-selling”. Some individuals are baying for even larger fines, following the payment insurance scandal, which is set to cost UK banks more than £8.9Bn.
At a time when so many companies are struggling to increase market share it becomes even more essential to keep hold of customers and benefit from repeat business. Mis-selling has a huge impact on brand reputation and customer retention, making it hard to attract new business and ensuring the loss of existing customers.
No doubt many sales managers will be counting their blessings that they had not been singled out and will be asking themselves how well their own sales cultures would stand up to such exacting standards.
The growth of compensation plans
Compensation plans have been a fundamental part of sales for decades, yet the majority do not encourage the right behaviour or motivate reps to sell in a way that is best for both the business and the customer. These issues are likely to get worse, as sales departments find themselves having to deal with an increasingly complex matrix of plans every time their company expands product lines, locations and currencies. It is, therefore, unsurprising that Gartner estimates that for every £100 paid in compensation up to £10 is lost. This means poor compensation planning and execution can lose money on two fronts – incorrect payments and mis-selling fines.
With more staff who are not in sales, from engineers to receptionists, being rewarded on variable compensation plans it becomes even more important to ensure the correct plans are in place to motivate the right kind of behaviour.
How to tell if your compensation process is broken
With so many sales leaders having no structure or oversight over how people are managed and paid, it is no surprise that mis- selling can occur. Several of the compensation plans in place at the time of mis-selling were designed to simply push reps to reach high quotas but gave little thought to the impact this might have on their sales techniques. This led to a culture in which reps were failing to fully explain to customers the cost of payment protection insurance (PPI) because they knew this would have an impact on their numbers. Managers were also being left in the dark, struggling to have visibility of their reps or simply turning a blind eye to what they knew were ‘shady’ practices.
So how can companies ensure the plans they have in place are not encouraging this kind of behaviour and are minimising risk operationally? There are a few things to avoid:
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