One of the most challenging and important responsibilities of sales leaders is to design a compensation plan that gets the desired results in a way that makes sense for the individual sales reps, the sales team and the company as a whole. Certainly, a major goal for most sales leaders is to ensure that the sales compensation plan would help to maximize sales revenue. But how do you create a compensation plan that drives revenue without sabotaging other important (and often conflicting) goals such as target client revenue, win-rate, customer satisfaction, portfolio mix, high quality and profitability.
It is not hard to imagine that salespeople who are measured and rewarded on revenue growth alone, may be eager to pad their pockets with cash by selling to anyone who will buy rather than wisely discriminating about the customers the company hopes to profitably help and hold onto for the long term. For example, a recent client changed their go-to-market strategy to sell comprehensive solutions to large accounts and to move away from selling transactional products to anyone who would buy them. Their compensation plan did not change. Sales reps were bonused on meeting or exceeding revenue targets. So while the change in strategy made sense strategically, the compensation plan did not help to incent sales reps to follow the new plan. Accordingly, they kept selling what they were used to selling and predictably missed their targets.
It is also not hard to imagine salespeople who are measured and rewarded on revenue having a conflict with delivery teams who are measured and rewarded based upon profit. For example, a recent client found that their delivery teams where cutting corners at clients to meet tight budget parameters. This created dissatisfied clients and higher account churn – which eventually negatively impacted revenue.
Smart sales leaders think through (with their teams) any unforeseen consequences of whatever incentives you offer as carrots to your sales force to minimize problems and to motivate the desired behaviors.
The good news is that you don’t need to be an expert at solution selling training to identify a simple example of an incentive program gone wrong. We have all had a favorite store where we knew we could get attention and help in finding just the right item. I certainly did. Then, suddenly there was a drastic change in the way I was treated. Instead of a clerk with time to spend helping me, they hurriedly answered my question and went to help someone else before I could find what I needed. My retail “helper” was impatient and looking over my shoulder to grab the next customer before I was truly served. What had happened? I learned that sales clerks were no longer being paid according to how well they served the customer but by how many customers they talked to in a given day. The unforeseen circumstance? They lost me as a loyal customer. I’m sure that is not what their new pay plan intended to accomplish.
Before you implement a new rewards and recognition program designed to incent your sales team, be sure you:
• Are clear on the purpose, desired behaviors and consequences.
Know what your customers value about the way you do business. Are they interested, for instance, in service before, during and after the sale? Know, too, what would make a real difference in your revenue. Should you focus, for instance, on a different type of customer or, perhaps, on fewer but larger deals?
Identify your sweet spot and make sure you don’t jeopardize the opportunities to capitalize on that sweet spot by incentivizing the wrong behaviors in your sales team. Choose what behaviors will promote your sales strategy and be sure those are the behaviors you reward.
• Understand what would truly motivate your team.
Sure, there are tangible rewards for performance above and beyond like cash bonuses, company-paid vacations and company cars. But research has shown that often the intangible rewards are just as effective. Consider giving a day off or allowing more flexible hours. Regardless of what carrots you offer, make the award public whenever it makes sense. Thank each honoree in front of others so they have the recognition they deserve. Make sure that the rewards on offer are equal to what you are asking people to achieve.
• Set agreed-upon guidelines.
The best sales compensation plans are those designed collaboratively by both sales managers and team members. This way the strategy, goals, roles and rules are well-known to everyone and accepted as fair and worthwhile upfront so you reduce misunderstandings or conflict as you implement the plan.
Are your rewards motivating the “right” sales and service behaviors?
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