Sales compensation is a major driver of behavior and performance in a sales organization, and therefore a major force behind growing revenue. It’s is one of the best tools a company has, yet too often it’s not given enough careful consideration during the design, implementation or communication phases.
Without connecting the plan into a strategy or a clear design process, issues arise. Too often people dump all the problems on the table and try to figure how to approach them. In those situations, the best thing you can do is understand the challenges and start to bring some logical approaches to them, one by one.
We see a number of sales compensation challenges that are consistent across organizations. Many of these challenges, however, are not all truly sales comp related but difficulties in other parts of the organization that trickle down to sales comp and require attention.
1. Differentiating top performers. How do you make sure the top people are actually paid the most and you’re not overpaying the lower performers? Making sure there’s a significant difference in target and actual pay for the true performers is critical for attracting and retaining the top talent.
2. Solution selling. Many companies focus on selling products and services, but as the markets become more competitive customers demand more. We see selling a solution as a way to manage those customer needs, a more effective way to be able to offer our product, and a path to differentiating our company. So how do we represent that in a sales compensation plan?
3. Keeping the organization engaged. During challenging economies it is critical to keep the organization engaged. In the most recent downturn there was a 10% shift back in the number of reps at quota or above compared to a normal year. That year begged the question: “How do we keep the organization in the game rather than having them ride the storm out and just get through the year?” If people are missing the marks with their sales compensation, how can we use the plan or other programs to keep people pushing ahead? If we have a lot of people at 85% performance or 90% performance to quota, how do we get them up a couple of points incrementally?
4. Reducing the complexity of the sales compensation plan. Often, the more technical an organization is – or the more engineering-oriented an organization is – the more complex the sales compensation plans will be. The temptation is to include everything that’s important in the compensation plan. The key, however, is to include the two or three things that are most important to maintain clarity of message.
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