By David J. Cocks, CEO
When management start talking about increasing profitability, sales representatives start to worry. They know improving profitability usually means cutting commissions and eliminating expenses, possibly for marketing, administrative support or benefits they value. They are concerned the increased profitability will come at their expense.
But that's not the way CM Global Partners and CompensationMaster approach the situation.
One of the main reasons our system is so successful is we don't just come in and transfer money from sales representatives to the company. We wouldn't be able to achieve the 98% retention rate we are currently getting if that was the way we worked.
Instead, our strategy is to optimize the way our clients do business.
Better Meet The Needs Of The Sales Force
First, we re-allocate expenses to better meet the needs of the sales force. We come in and analyze the market, the sales force, and the company's financials. We talk with the sales representatives and find out what they want. Very often this produces some surprises for the management team, which may not have realized the needs of the sales reps have changed. We identify groups of sales representatives that are not having their needs met and look at what the company can do to better meet those needs.
Very often we can identify expenses no longer providing the value they should. In some cases there are benefits the sales force doesn't want anymore. For example, sales representatives might not want health insurance because spouses' employers provide coverage. In other cases, investing in training or additional administrative support might give the firm a competitive advantage in its market. We help our clients re-allocate their expenses to produce the maximum value for the sales force.
Motivate Effectively With The Right Commissions
Then we design compensation plans that are consistent and fair to everyone. We eliminate exceptions and disincentives to greater production. We try to give all the sales representatives the same opportunity to increase the amount of money they make.
We like to offer a variety of plans so each sales representative can choose the risk- reward combination that he or she finds most exciting and motivational. And we make sure the sales representatives are paid as much as possible while ensuring that the company has enough money to pay its bills and make a profit.
Reward Sales Force For Increasing Revenue And Reducing Expenses
One advantage of our system is we tie together human resources, finance and sales management, and align the goals of those three groups.
With a contribution-based approach, sales representatives are responsible for contributing their fair share towards corporate expenses and profit. Once a contribution has been made, they are able to keep most of the rest of the revenue they bring in.
Sales representatives are motivated to increase revenue; as they sell more, they make more. But with this system they also increase their income by reducing expenses. When expenses drop, the amount they have to contribute decreases, so they keep more of the money they bring into the company.
The result is that the sales representatives acquire a perspective similar to the one management has, with twin goals: increasing revenue and keeping expenses under control.