We have talked about the key components of successful sales compensation plans that include:
- Timing and frequency of changing compensation plans
- Aligning comp plans with the top and bottom lines of the business. Strategic and tactical goals
- Rewarding the behavior you need to run the business
- More complex products generally require richer compensation programs
- Paying for influence, how much the role affects the customer buying decision is tied to how much you will reward that effort
- Essential components of a solid plan, the right blend of salary, commissions, bonus and kpi’s
- Pay on revenue or margin or a combination of both
- Milestones, gates and hurdles, how steep to make the hills in your plan
- Accelerators or straight line compensation
- The limits of what you can manage with your compensation
“Nothing happens until somebody sells something” accredited to either management guru Peter Drucker or James J. Watson of IBM
It can also be said, that nothing happens until somebody pays for what was sold, an axiom that every small business owner knows very well. So, aside from all the basic building blocks of your comp plan, a good fiscal idea is to take this into account when you build the plan. I have seen salespeople take advantage of plans based on ‘bookings” or orders, get the commission and leave town, the owner sad to discover the sale really never happened.
Depending on your transactional volume and sales cycle, this can be managed by the average pay cycles. It is prudent to build payments into the body of the plan, no ticky no laundry as they used to say. Which leads to another and often overlooked part of managing sales plans. Everything must be in writing, and the plans must be explained acknowledged and signed. No exceptions unless you enjoy spending time at the Labor Board and writing big checks to people who no longer work for you.
It is often said that salespeople are “coin operated” but are they?
“Out of the nearly 20 million sales professionals, a mere 20 percent make a whopping 80 percent of all sales.” Herbert Greenberg
Is it the paycheck that drives their behavior or the need to win, the need to be on top in a competitive business environment? While my experience shows that all sales people are not simply working for the fat paycheck, there is often a mix of the need for recognition as well as being justly rewarded for their efforts. It is very true that most salespeople will manage their business efforts to maximize the benefits of their compensation plan. And this is not really a bad thing, unless you as the owner or manager fail to understand how this works. When you do, you can sculpt the right plan to drive the behavior you need, the results you want and the rewards your sales team strives for…