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What happens when the sales leadership team takes a hard look at its sales compensation plan? Do they talk with their calculators? Is a spreadsheet the primary conversation piece? Think about what happens at meetings about sales strategy or sales roles and the question of sales compensation comes up. People start talking about whether the commission rate should be increased or decreased. Comments like, “Let’s put an accelerator in place to drive performance. Maybe we need to uncap the plan, or add a threshold for the low performers,” fly through the room.
As sales executives determine priorities for their business related to sales compensation, they need to set their C-level goals. These will define the major priorities for the organization that will be converted to the sales compensation plan. Those priorities provide clarity for how they will design the plan and the behaviors the plan’s going to drive in the organization. Once set, the C-level goals will force answers to the key questions that will lead to the program’s success.
“I like to say that the comp plan is the caboose, not the engine,” says Doug Holland, director of HR and compensation at Manpower. “Compensation should never be driving the strategy. The strategy drives the compensation. It’s incredible, especially in times of stress, how that message can kind of get lost. Comp issues are often symptoms of bigger problems, and it’s the easiest, most tangible thing to look at. The challenge is, do we have the right job designs? Do we have the right people? Those are harder conversations. That’s often the struggle with comp plans.”
One of the first things our firm does when we look at sales compensation is understand the sales strategy. We ask: How should the priorities of the business be represented in the sales compensation plan?
Recently, I met with a couple of the senior sales leaders of a high-tech hardware company at a coffee shop in Dallas. They were at the end of their compensation design process – just waiting for the final nod of approval from their CEO.
Unfortunately for them, their CEO decided he wanted to get involved, at the end of the process. While he had received updates throughout the prior months, it was only now – after all the intricate details had been woven together – that he decided to take a closer look.