Top 4 Things To Avoid When Applying LEAN To Sales Force Compensation

By David J. Cocks

When compensation plans are structured correctly, it is possible to achieve all of your goals at the same time. Sales people can be paid the maximum possible while ensuring that corporate expenses are covered and profitability goals reached. Goals of the sales team and executive management can be aligned, with it being clearly in everyone’s interest to maximize revenue and control expenses.  

The company that structures its strategies correctly and with the right partner can gain a competitive advantage over other businesses by drawing the right people to the business almost magnetically. Here are some key lessons to avoid to ensure a successful restructure. 

Don’t Assume You Know What Your Sales Associates Want! 

Talk to them and ask what style of compensation they would like. When we do focus groups and online surveys of sales associates, we often see situations where managers are surprised by some of the things the sales force says. It’s easy for perceptions to be skewed by a few vocal people, and even managers who do a great job of having their finger on the pulse can find that the needs of sales associates have shifted due to new competitors entering the market or economic changes. It’s important to consider issues beyond commissions, because those can have a powerful impact on motivation. The company may be spending money on benefits that are no longer wanted. Technology changes rapidly, and tools can become outdated fast. Marketing may be delivering collateral the sales force doesn’t value the way it used to. Even office furniture and fixtures can make a difference. You want to determine if you are offering the combination of services and support the sales associates need – you can often identify opportunities to reallocate expenses to spend money on the things that matter more now.  

Don’t Neglect Updating Plans.

 Merit-based compensation plans are not something you can design once and leave alone forever. They need to be updated regularly, partly to meet new competitive situations as other companies enter and leave your market, and partly to take into account the changes in the CPI and prices in your market. You also want to update plans whenever you make an acquisition or engage in a merger. This is the best way to keep your company nimble and aggressive in your market.  

Don’t Skimp On Training Managers.

 Make sure your managers understand the vision and know how to sell it. If they don’t fully understand the value behind your new plans, you won’t get the results you are expecting. So make sure you invest in training them and getting them excited.  

Don’t Make Exceptions. 

There will be people who push back about the new compensation plans. But don’t make exceptions or special deals to keep them satisfied. That undercuts the whole structure of your compensation strategy and damages your integrity. If there is a strong reason to create an exception, instead of making it an exception, consider making it one of your public plans. Hold it to the same standard of profitability as the other plans, and make it available to everyone.