Money is money right?? Well, yes and no. Your company has a strategy to hit a goal…whatever that goal may be, for most companies the goal is to make more money. So you are ready to design the sales compensation plans and hopefully you have read some of our other blogs and know that those commission plans need to align with the corporate strategy. So a reasonable thought would be, let’s measure sales revenue and pay on that, a results based measure that focuses on making money, perfect. However, did you ask if HOW the company makes this money matters to the strategy??
We attended the World at Work’s Spotlight on Sales Compensation last week in Chicago. During one of the sessions the speaker asked the audience filled with sales compensation professionals that work at companies just like yours, who has dealt with a legal action due to their sales compensation plans. Forty percent of the room raised their hands…FORTY PERCENT! Did you also know that some courts will award triple damages to a disgruntled employee?? These numbers are not good for you and certainly not good for business.
What makes sales compensation risky?
I just got back from a sales conference where I participated in a round table discussion about improving your sales strategy. There was a lot of great conversation about what changes companies were making in the upcoming fiscal year to improve their sales strategy to match their corporate strategy. Some were creating product specialists thus having to do more team selling, some were creating account managers where they didn’t have them before. When I questioned the table if they changed their sales compensation strategy to match, the answer was a resounding no. They all felt like that w
This is Roxie and she is having her six month checkup, which reminds me that it is July and for those of you on a calendar fiscal year it is time for your sales incentive half year plan evaluation. You see Roxie isn’t very happy to have this checkup. Are you ready for yours? If not, get ready, arm yourself with data and not wishes and let’s figure out how healthy your sales commission plans are and if you will reach your strategic goals by year end.
You will need to start by gathering a few pieces of data that will help you assess the health of your sales incentive plans.
That headline gives me a flashback to my childhood watching Richard Dawson host The Family Feud. And while our sales commission survey doesn’t receive such hilarious answers to questions such as “what month of pregnancy a woman begins to look pregnant” to which the contestant replied “September.” (click here for a great laugh) It does however shed a great deal of light on what people are doing with their incentive plans and areas where improvement can be made.
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