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Is Your Sales Rep Compensation Plan Pushing You Up or Out?

Posted by Patrick Seidell on Sun, Sep 30, 2012
  
  
  
  

When sales reps think about their compensation, the first thing they ask is “How can I make more?”  The answer to that question can either push you up to better performance or push you out to a new company. Today’s post will give you a tool to decide if your comp plan is built to keep top players on board or push them out to a new job.

sales rep comp plan

Talented reps – with the right comp plan, support and product/service set – always make targets. Great companies attract and retain "A" level sales performers. Click here to learn how the best are paying for top performance, retaining their talent and making their number.

Should I Stay or Should I Go?

The best sales comp plans effectively motivate and retain "A" player reps, push "B" reps toward better results and weed out the "C" players.  They make sure that support functions like Marketing are financially motivated toward improving sales results.

The worst plans do the opposite – enabling poor performers to hang around while driving the best to move elsewhere to earn what they’re worth. With no alignment of the support groups to sales goals.

Is your compensation plan well designed or driving top-tier reps away?  Click here to register for our "Make The Number" tour and get our Sales Rep Comp Assessment Quiz.

Comp Assessment

Some of the questions you have to ask about your Comp Plan:

  • Are there more than four (4) measurements used to figure my total pay?
  • Does the plan put a cap on total payouts, limiting your earning opportunity?
  • Would it take more than 3 minutes to explain the plan to someone who isn’t in sales?
  • What percentage of the sales team is making quota?
  • Have the important elements of the variable piece of your comp plan changed more than 2 times in the past 3 years?
  • Does executive leadership refer to key annual sales goals (customer retention, new product sales targets) that are not part of your compensation plan?
  • Is your comp plan (both how it’s designed and how much it pays) similar to your toughest competitors with the best talent? 

In addition to your specific pay plan, consider this: Does your company have an incentive pay plan for those that directly support, and are focused on sales outcomes?  

Marketing and lead development reps that are paid incentives if they meet high levels of quality and quantity for you will help you make your number.  Customer Service and Billing have a direct effect on your customer retention - do they have a pay plan that rewards improved retention, rapid problem resolution and high billing quality? 

Your Call to Action

Take a couple of minutes to complete the Sales Rep Comp Assessment Quiz.  After you’ve got your results, do the following:

  1. Ask yourself this: “Am I a top-tier performer in sales?”  If you answered “Yes” while being completely honest, continue to #2, otherwise, skip to #4.
  2. If the Quiz results show that your Comp Plan is not designed to keep “A” players like yourself, show the results to your boss.  Use the quiz as a discussion guide on how the Comp Plan can be better designed to keep top-tier players.  Make sure you’ve done your homework about how the best competitors are paying their “A” players.   If you’re really a high performer, your boss will listen.
  3. If the results tell you that the plan is well designed and competitive in the marketplace, keep selling and let your work and talent continue to pay off.
  4. If you answered in #1 above that you’re not a top-tier performer in sales, there are two possible directions you can take.  You can stay the course, remain with your company and hope the plan doesn’t get corrected to keep the best, motivate the middle and weed out poor performers.  Otherwise, find a new company to work for where the “C” players stay around because the comp plan allows them to.

As a top-tier sales rep, you have a large number of options available to you – both inside your current company or with another organization.  You owe it to yourself to make sure that your comp plan continues to motivate you toward excellence and keeps you competitively paid.

I welcome your comments.  Keep the conversation going.

 

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Comments

Patrick,  
 
Great post and guidelines. Those questions certainly knock out most comp plans I ever worked under when I was selling, and most I've seen at employers or clients since. The 4-element/3-minute guideline is so rare, yet so important.  
 
The most effective plan I was ever part of building had core elements and a structure that stayed static year over year, but the importance and payouts on each element changed based on the goals for the year. I believe it had 5 elements, but once you understood how one worked, they all worked the same way (sort of like a balanced scorecard). It was simple, clear, and drove whatever was important to the business that year, with unlimited payouts for top producers. A-Players loved it.  
 
BTW, I heard John Kenney talk about this topic, in part, as part of a presentation at the Profiles International client Summit this year (his topic was hiring A players). Pens were flying in the room when he talked about your recommended guidelines for comp plans.  
 
Keep the good stuff coming, 
 
Mike Kunkle 
Posted @ Sunday, September 30, 2012 1:13 PM by Mike Kunkle
Mike, 
 
Thanks for your comments. 
 
It's true that a large portion of companies wouldn't hit on most of the 10 items in the Compensation Assessment Quiz. Great companies have thought about most of these elements but for even the best, some fall through the cracks. 
 
We really strive to show what world class looks like. To be sure, some of the elements are more important than others. As you mention, having a plan with no cap is really important to "A" players. Just the process of making sure that the plan is one that is competitive in payout ranges and base verses variable split is essential. 
 
Some of the items are consistently overlooked by a large number of companies. Incenting support groups in a way that clearly aligns with sales goals at the rep level is one example. 
 
One other thought to toss out on this: A competitive, clear and aligned comp plan is the price of entry for companies to attract and retain "A" players. Once on-board, there are so many other things need to be considered to keep these stars. Great quota setting. Solid sales territory designs. Focused and relevant training and managers that enable their teams to fully realize that comp plan are just a few. 
 
Glad to hear you attended the presentation by John - he mentioned that the group was really engaged on all fronts. 
 
Thanks again for your comments and we'll keep the conversations going. 
 
 
 
Pat
Posted @ Monday, October 01, 2012 6:30 AM by Pat Seidell
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