By David J. Cocks
The challenge of designing sales force compensation plans is to create an environment where sales people are motivated and a transparently business culture is created. It is vital as many obstacles as possible are removed from the process so sales people can maximize their results while ensuring the company’s greater goals are met. Those goals could include achieving profitability targets, increasing revenue, controlling expenses or recruiting and retaining a desired sales force.
From our experience spanning over 25 years, the below points are vital to enhance the process of successfully setting up LEAN to your sales force compensation plans.
Treat Everyone Fairly and Consistently
If you have longevity bonuses or other features built in that give one group of people a built-in advantage, this is a good time to remove them. The best way to be fair is to give everyone the same opportunity to excel – and to pay them based on current production, not what they did in the past or might do in the future. When you do this, you build in a level of transparency and trust that is deeply appreciated by your sales people.
Offer A Variety Of Compensation Plans
The reality is that not all sales people are the same, and what motivates them isn’t always the same. Someone who has just joined your company will need more training; a top producer may want administrative assistance or more control over money spent on marketing and lead generation. Personal issues come into play too – someone who has college age children or is getting close to retirement might be more risk-averse and prefer a compensation plan that offers greater security. Or they might be ready to go for broke and do whatever gives them the chance to make the highest income. The simple fact is that offering a variety of compensation options makes your company more competitive – your sales associates can evolve their capabilities and grow in their careers, and get compensated appropriately. They don’t have to leave your company to get a different style of compensation that is more suitable to their current situation.
Take This Opportunity To Re-Examine Past Deals
Re-examine the company’s business model. Why are people working for you rather than a competitor? What sets you apart? Do you have a clear, defined value proposition? If you do, your compensation plan should support your value. If not, you may have some changes to make. Don’t be afraid to question long-standing policies or services. Just because your sales associates negotiated for something years ago doesn’t mean they still want or need it. Put everything on the table and don’t be afraid to craft a vision that is brand new – even revolutionary. You’ll be surprised at how much energy a brand new, crystal clear value proposition can create.
Use Business Modeling Software To Project Results Ahead Of Time
When you are making significant changes to your company’s sales force compensation, it is essential to know ahead of time the impact those changes are likely to have on total revenue and profitability. You can do projections in accounting software or Excel, but using business modeling software such as CompensationMaster’s makes it easier to see the big picture as well as interpret the nuances.
Make Sure The Sales Force Wins!
Oftentimes, sales associates are reluctant to have commission structures changed because they believe any change involves money coming out of their pocket. But if your new plans are designed correctly, sales associates should be able to make more than ever before. You also want to make sure they win on the sup- port and services issues. This is one reason the focus groups are so important – when you know what the sales force cares about, you are better able to re-allocate expenses to give them what they want. A sales force full of people who are powerfully motivated and have had disincentives to greater production removed is going to propel the company to increase revenue like never before.
There are a variety of numbers you should track when you change compensation plans, including the increased productivity of people who are on the new plans, enhanced recruiting, retention of sales associates, and more. Start with a bench- mark before you introduce the new plans and track important statistics over the year after you launch the new structure. You’ll find it easier to report on ROI, as well as to see which offices or regions are surpassing others.