This is no joke; I was recently talking with someone who hadn’t changed their sales compensation plans for 15 years! Not surprisingly this company’s revenue was in the tank, all their sales reps were preforming below expectations, turnover was an issue, and the list goes on. Now this is an extreme case but I do run into companies that rarely change their sales commission plans. These companies have yet to realize the predictable relationship between the company’s success and their sales compensation plans.
In a recent survey by Cornerstone Software, 46% responded their current sales compensation plans only have a flat commission rate. Every sale the rep makes earns the same commission rate, month after month and often year after year. A flat commission rate does not change with the attainment level and should be reserved for low priority measures in the commission plan. There is nothing for the rep to get excited about reaching, no motivation to attain the next level. These types of plans usually fall flat!
What do Sales compensation and a New Year’s Resolution have in common? They both can fizzle out by the time April rolls around. Let’s think about this for a second, beginning of the year you are energized to make major changes to make this the BEST year ever. You make resolutions like going to the gym or eating right, and by February you realize it is hard and you start dropping a day here and there. Then by end of March the weather is nicer and next thing you know…what happened to my resolution and why don’t my pants fit? With Sales Compensation, you strategize, you crunch a bunch of
In the latest poll by Cornerstone Software 55% of those who responded missed their 2013 revenue goals by 10% or more. That means if you are a $5m company, you would have missed your revenue goals by $500,000 or more. That is a huge shortfall in revenue. I can’t help but wonder how much of that shortfall was due to a bad sales compensation plan. Did you just dust off the 2013 plans for this year and expect a different result?
A badly designed sales commission plan can manifest itself in many ways. These are some of the most common:
It’s New England and this winter we have been getting stuck a lot! As I was sitting at the airport waiting for yet another weather delayed flight, I started thinking about what causes sales reps to get stuck in a rut. Are your sales reps stuck doing the same old thing they did last year? How did that work out for you? Did you make your revenue goals?
You’re partway through the first quarter. What can you do to inspire excellence in your sales organization so you can crush your 2014 goals?
Inspire excellence by creating a team of winners is no easy job but if you can inspire the sales teams to reach new heights your sales organization will be happier and the company owners or shareholders will be delighted. Creating this team of winners makes attracting top talent easier and retaining top performers a piece of cake.
So often in the beginning of the New Year your sales reps are exhausted. If your commission plans were structured correctly these reps spent lots of extra time in December closing every deal possible because they understood that their commission rates would drop in January when the new 2014 sales commission plan was rolled out and they wanted to get that accelerator rate on everything they could.
It is almost January 1st. You have been busy closing the year strong. Your 2014 sales commission plans are complete. Now how are you going to tell your sales reps their quotas are going up and their rates are going down! What is a sales manager to do?