There is a temptation to propose a low salary with a juicy commission plan.  But when you are entering new foreign markets, this is not usually a good option if you are serious about developing your international business.

The main problem is that commissions are based on percentages and numbers.  When entering a new market it’s hard to come up with good numbers.

But that’s not all. There are a few things that come into play related to the international aspect of these sales. Here are two of the differences you need to take into account when coming up with a good compensation plan to drive sales performance in a new foreign market.

Your Sales Person Wears Many Hats

It’s true in all markets that salespeople where many hats, but when selling to new international markets your salesperson also has to adapt your sales and marketing tactics to a different culture.

Whether your salesperson is from the local market or is from your home country, he still goes through a period of adapting to being the connecting point between two different cultures.

Most companies find they need to adapt their original sales and marketing tactics when they first start selling in a new country.  There is almost always some adaptation needed to come up with a good sales strategy.

This takes time.

And it also takes teamwork with the home office.  This means he’ll spend more time wearing different hats than if he was selling to a market feedback cultural adaptation.

This takes up even more time.

And the trouble is: no one can really estimate just how much time this will take until you have been selling to your new international market for a while. You want to make sure you have the right person doing the job for you.

Cultural Differences In Compensation

Given that he already has so much to do, you have to make it easy for your salesperson to fit in well within his environment. Different cultures have different sales practices and you need to make sure your compensation plan works well to drive sales in this environment.

There are many different types of cultural blunders linked to expecting one sales compensation plan that works in some countries to work well in other countries.  And it’s not only a question of knowing where bribes and where they are illegal.

• There are countries where commission-only based sales do not work well simply because the legal system does not make it an attractive or easy set up to work with.
• There are countries where not having a company car is not a good sign.
• In some countries payment of overtime is expected and in other countries there is a certain level of tolerance for non-payment.

Even if you think compensation information is between you and your salesperson, the other people he comes into contact with will probably notice any different practices.  This includes your potential clients.

And this is where funny things can start.  People from different cultures can make wrong assumptions that impact how your company is perceived.  Salespeople who earn big commissions because they are successful are usually proud to show this in North America for example.  But this is not the case in other countries.

Two Step Approach

You don’t want to create any cultural blunders when you first set up your compensation plans for the first salespeople you hire to open new international markets. This is why you will probably look at a two step approach. In the first step:

• Companies with little budget and only focusing on immediate sales will try a compensation plan based on large commissions or a commission-only plan… in markets where the legal system makes this easy to do.

• Companies focusing on sustained international business development will invest in a salesperson capable of wearing many hats and helping them adapt to a new market. They will probably pay him a fixed salary and maybe a smaller commission at the end of the year.

Once businesses become familiar with cultural differences in what works in driving more sales, they can evaluate how best to set commissions and sales targets for an all round win-win situation.

I’ve worked for a few North American companies setting up European offices to develop more European sales.  There was never a sophisticated commission plan to begin with and targets were only set as guidelines.

There was always a good level of flexibility in the first 2 years.  This was the average length of time needed for the North American home companies to learn about their new market, including how sales were made abroad and how to adapt to the differences.

But there were always weekly calls to a senior executive in the North American home office.  These weekly calls made it possible for North American management to stay current on all activities including actual sales results and expectations.

There is no best way to set up commission plans and targets for all new foreign sales offices.  You need to know the sales environment to learn what works best and this takes time.