Sales Compensation is NOT about Money

Happy 2010 to everyone!

So you’ve got your goals for explosive growth this year all mapped out.  Good for you!  Now the hard part….

Are your sales people on board?  Have they bought in and accepted ownership of their portion of those goals?  Have they looked closely at what will be required of them to reach those goals?

This is where most sales organizations fail.  In the board room, the strategy sounds brilliant and the numbers seem reasonable and achievable.  But somehow the certainty at the corporate level doesn’t translate into enough additional opportunity when the sales feet hit the street.

And that’s where the sales compensation plan comes in right?  Well, if that means you use some formula to increase each salesperson’s quota so that the sum total of the quotas matches your overall corporate sales goals, then you’re missing the most crucial aspect of sales compensation.

The objective of a sales compensation plan is to drive appropriate behaviors.  In some businesses commission rates vary depending on the profitability of various products or services.  i.e. We want to encourage sales people to sell the most profitable things we produce.

From the salesperson’s perspective, these things are completely arbitrary and generally dampen motivation considerably.

Salespeople tend to be pretty ego-centric and see things through the lens of “what’s in it for me?”

Whatever your company goals and expectations for your sales team are, you’d better take time to figure out how you can show the salesperson what’s in it for him.  “Hey, you’ll make an extra $50k in commissions if you hit these increased goals I’ve set for you…” won’t cut it.  The salesperson just perceives the increased goals as additional work for him.

There are two indispensible aspects of selling a comp plan to your sales team:

1. You have to help the salesperson understand the things that you’re going to change that will help him sell more – increased marketing spending, new, more competitive products, more leads, new accounts, etc.
2. You have to help the salesperson look at how they spend their time and maximize the effectiveness of their efforts.

Selling your sales team on what the business is doing to help them should be straightforward.  Most businesses just fail to spend much time on it at all.  It’s worth spending half a day putting together a briefing or a few slides to walk them through.  With salespeople, the old saying “You can’t bullshit a bullshitter” is a good thing to keep in mind.  Be very specific.  Quantify things as much as possible.  “We’re going to go to the big XXXX show this year!” is not good enough.  Tell them how much that is expected to cost and how many new leads you’re hoping result from being there.  In fact, if you’re able to present all this in contrast to actual spending levels, numbers of leads, etc. for the previous year, that’s even better!

Showing the salesperson how to more effectively leverage their own time and effort is a taller order.  Salespeople are very much into freedom and doing their own thing.  It’s easy to be perceived as trying to micro manage.

This is where setting the goals and actually achieving them meet.  You and your salespeople have to be able to identify the part of your sales process that needs to change to meet the new goals.  Did we not generate enough new leads? Then how many new ones do we need and how are we going to get them? Did we lose too many deals to a competitor?  Why?  What will we do differently to beat that competitor more often?

These questions MUST be answered.  The more specific you can get, the more likely your success becomes.  The two factors that keep people from achieving their personal goals most often are –

• Inability to be specific and clear about where you want to go and when you want to be there.
• Inability to identify the daily behaviors that will lead to the achievement of those goals.

(here’s a good resource on goal setting – http://www.pauldeburger.com/downloads/articles/step-up.pdf ; )

Think about that!  It’s no wonder a salesperson that consistently beats their quota is so rare!  Most businesses aren’t able to tell them how to meet the goals they set for the salesperson and the salesperson is unlikely to have that ability either.

Examples of daily goals for a salesperson would be –

# of cold calls; # of potential prospects identified; # of new qualified prospects generated; # of presentations/proposals to qualified prospects; # of calls/meetings with existing customers; # of calls/meetings with people of a certain role within an organization

The fact is that when you and your sales team are able to identify the daily objectives that, using realistic expectations for results, will lead to the sales goals you’re after, you’ll find that surpassing your goals becomes more likely than failure!

In my work with businesses implementing CRM to improve efficiency and effectiveness of their selling efforts, one of the most shining examples of setting goals I’ve encountered was a company that competes in a narrow niche and their sales focus was mainly maintaining relationships with existing contacts for repeat business.  They found were able to show a direct correlation between sales success and number of “touches” with customers.  The more the salesperson made contact with customers, the more they sold.  So, they changed their entire commission and bonus structure so that it is based now entirely on the number of customers touches and not actual sales!  I know, it seems like a wild leap but, I can tell you that since implementing that change, they have vaulted from one of many to the dominant player in their industry.  My belief is that the change they made had the simple and extremely powerful effect of focusing sales attention on the one crucial behavior that leads directly to sales.

In your business, if it’s cold calling or generating prospects of a certain type or making contact with decision makers or whatever, you might want to think about tying sales commissions and targets to that objective.

Bottom line – the more clearly you can connect the dots between what your salespeople do each day and the results you are expecting, the more likely you and your salespeople are to succeed.  Whether you tie their compensation to them or not, if you all agree on what your salespeople should be accomplishing each day, week and month, you will all be agreed that you expect to reach your goals this year!

Popularity: unranked [?]

Related posts:

1. Recruiting Quality Salespeople is a Major Key to Being Successful in Sales Management
2. You Must Be Responsible for Your Own Motivation When Working in Sales
3. You Want Me To Sell How Much?!?!
4. Motivate the Sales Evangelist? Should not be needed
5. Properly Qualifying Prospects Separates the Winners from the Losers More Than Anything Else in Sales