sports_contracts.jpgI was born in Canada, a lifelong (suffering) fan of the Toronto Maples Leafs hockey team. When I moved to Chicago to work with ZS, I had the good fortune of witnessing the growth of a perennial contender for the Stanley Cup in the Chicago Blackhawks. The NHL has salary caps, as do most professional sports leagues. Salary caps are put in place to ensure that large market teams do not simply “buy” championships or create competitive imbalances. It’s not a perfect system, but most people understand why caps are in place.

One of the results of a salary cap is a fairly steady churn of players. When teams “lock up” some of their players with large contracts, that leaves a smaller pool of money to redistribute to the rest of the players. While some players are willing to take less money to help a team retain more key players, the reality is that once teams win championships, players often seek pay increases. Teams that win championships often can’t afford to keep all of their players and lose several through trades or free agency. Teams that perform well over time tend to rely on a strong core while rotating through other players, replacing players with high-contract demands with lower-paid players. This typically involves rookies or younger players who are signed at a relative “discount.”

An interesting thing happened this year with the Blackhawks. They have a player on their team named Artemi Panarin, who has three years of professional hockey experience in Russia. This is his first year in the NHL, so he is considered a rookie. However, his contract reportedly is quite interesting, and it’s built on some principles that are applicable to sales compensation. 


RELATED CONTENT

BOOK: The Future of Sales Compensation

BLOG POST: NCAA Basketball, Cinderella Stories and Sales Contests



Artemi Panarin and the $1.725 Million Performance Incentive

Being a rookie, the Chicago Blackhawks wanted to sign Panarin to a lower-value “rookie contract.” However, having played for several years at a professional level, Panarin built into his contract several hurdles through which he could earn additional incentives. For example, Panarin would receive a bonus if he played a certain amount of time over the season, or if he was voted one of the league’s most valuable players in specific categories. But one of his bonuses was tied to being ranked in the top 10 in scoring.

With three points in the last game of the regular season, Panarin finished 10th in scoring, two points ahead of the 11th-place person. That three-point game earned Panarin a $1.725 million bonus. Although that last game of the season was essentially meaningless to the teams involved in terms of playoffs and standing, I suspect that it meant a lot to Panarin. I imagine that he was working just a little bit harder than others.

Maximizing and Rewarding Performance With Sales Comp

Much like Panarin’s bonus structure was designed to both motivate him (during the season) and reward him for his scoring performance (at the end), sales compensation programs should similarly motivate and reward. To motivate, programs should be designed with multiple ways to win. If Panarin wasn’t going to finish in the top 10 in scoring, he certainly had other incentives in place that would keep him engaged.

Similarly, your incentive program shouldn’t discourage salespeople if they find themselves “out of the money” early in the year. Building in mechanisms to keep people in the game as long as possible will result in higher motivation and better performance. And at the end of the plan period, the incentive program should reward performance. Rewards can be tiered (higher performance equals higher rewards on one metric), discrete (fixed reward paid for achieving some level of performance on multiple metrics) or a combination of both.

After looking at Panarin’s reported contract and thinking about the incentives it provided, I thought to myself, Perhaps sales compensation experience has a role in designing contracts. Blackhawks, are you listening? Call me.

Topics: Steve Marley, sales comp, Hockey, Artemi Panarin, NHL, sports contracts, Blackhawks