Smart Salesforce Compensation

By Lain Ehmann

The right products aren’t moving, the right prospects aren’t signing on, or the right numbers aren’t being charted. The natural response of many upper-level execs is to turn to the sales compensation plan to fix problems.

While the sales force compensation plan is a powerful tool, it must be used properly to encourage the results you desire, say Mike Marks, principal and managing partner, and Mike Emerson, sales compensation practice manager, Indian River Consulting Group, and co-authors of What’s Your Plan? Smart Salesforce Compensation in Wholesale Distribution (Distribution Research and Education Foundation, 2003). Here are some of their top tips for getting compensation right.

1. Clarify goals versus objectives. A sales team may have many goals, such as increasing sales, launching a new product successfully, expanding to an untapped market. But a goal is not an objective, says Marks. “An objective is something that’s actionable,” he explains. If you can’t lay out a specific plan of action for your team, then the goal shouldn’t be linked to your team’s compensation. “The idea is to have specificity about what people are supposed to do and how to measure it,” Marks explains.

2. Don’t expect the pay plan to fix all the company’s ills. You can have a good pay plan and weak sales management – and poor results. You can have a poor pay plan and excellent sales management – and good results. “If you have both a good play plan and excellent sales management, it’s outstanding,” says Marks.

3. Look in the mirror. If the sales team isn’t performing, before turning to the compensation plan take a look at your management skills. Assigning across-the-board quota increases instead of looking at sales reps on an individual basis is a sign of weak management. Another sign: writing off everything the rep says as whining. “Salespeople are the ones closest to the customers,” says Marks. Managers should look for patterns across their entire team and seek out the truth behind the words.

4. Avoid ad-hoc plan modifications. Any changes to the pay plan should be from the ground up, says Emerson. While it’s easier to tweak the compensation schedule, that’s not how real changes come about.

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