When there is trouble in sales paradise (i.e. the team is missing the number), one of the first places people look is the sales compensation plan. Why? Many people believe sales compensation is the ultimate motivator to a rep. If people aren’t making the number, it must mean you’ve done a poor job of properly motivating them, right? It is one potential cause of poor performance.
If you answered “yes” to 5 or more of the 10 questions, you are well on your way to having the worst sales compensation plan ever. In fact, if you answered “yes” to any of the 10 questions in the assessment, you should address the issue right away. Here are 3 reasons why:
1. Retention – Your top people want to get paid like they are the best. If your best rep makes slightly more than the average, they will grow tired of being marginalized. Many companies focus on controlling the top end instead of focusing on limiting the bottom. This is a mistake.
Solution: Starve the bottom to fund the top. Your #1 rep should earn 3-4X the incentive compensation of your worst rep. Don’t cap your plans and cheapen the work of your superstars. Underpay the ‘C’ players so the ‘A’s can cash in.
2.Attraction – When we interview sales reps for our clients, the 3 most common questions from ‘A’ players are: What’s the comp? What’s the quota? How much did the previous rep sell in the territory? If these 3 questions aren’t answered to their satisfaction, the conversation is over.
Solution: Reps know more about compensation now than ever. Using information from salary websites and peer discussions, they can gauge their worth in a hurry. Make sure you can support your base, variable and quota assignments through third party sources. Be able to clearly explain how you arrived at your numbers when implementing your incentive plans.
3. Scale – Ask any CEO what his or her objective is and they will tell you “growth.” If you tinker with your comp plan every year, reps don’t know what to expect in their paychecks and you are turning sales reps over at a rapid pace, you cannot scale your business. Growth becomes increasingly difficult and leadership starts to get antsy.
Solution: Give your sales reps the tools to be successful, starting with a compensation plan model you can use for more than a year. You may have minor iterations year over year, but wholesale changes should be avoided. Think long term vs. short term. Additionally, provide the reps with a compensation calculator. The first thing they do once you give them their annual compensation plan is go back to their desk and figure out how much money they will make. Make it easy for them and give them the tool!
Today is June 1. We are officially 5 months into the selling year, which means you have 5 months to assess, design and finalize next year’s sales incentive plans. If your sales compensation plan is about to drive off a cliff, now is the time to invest in making changes for the better.
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