In this Sales Leadership Quick Tip Video I explain how to approach poor performance in…
Cream rises to the top, oil and water separate and driven sales people will perform toward their compensation drivers. Early in my sales career a start-up wanted a fast increase in market share. To achieve this they priced aggressively and set a heavy bonus in addition to generous commissions to sell 50 units for the month. Because of the bonus, the 50th sale was worth 15% of my total monthly earnings. I kicked in my commission for the last sale (2% of month earnings) to achieve the bonus.
There were no rules that I could not do that, but ownership was upset at me for “cheating” to hit my bonus. What I was doing was working my pay plan. Every smart sales person will understand their pay plan and work to maximize earning. It is important to create a plan that profits both the company and sales person.
When creating a compensation plan, there are a few general guidelines I follow.
- Clarify or determine your company goals. When a company is clear about growth and profit goals it creates the framework to build individual sales targets and compensation.
- Total compensation should be fair for average performers and above average for top performers.
- Base salaries should be based on the sales cycle and size of the market opportunities. The longer the sales cycle and smaller the market would call for a higher base and smaller commission percentage. For shorter sales cycles and greater market potential the opposite is true.
- Commissions should be targeted on areas the salesperson has control over and will profit both the salesperson and the company.
- Create a team bonus. It will encourage sharing and support, and minimize unhealthy competition.
The company I mentioned above did not clarify their goals or ensure both the company and salesperson profited. They were simply shooting from the hip trying to sell something.
A well thought out compensation plan will keep your best people happy and weed out those who cannot meet performance expectations. If you have questions about your compensation plan give me a call or send me a message and I would be happy to discuss it with you. Phone: 916-596-3713 / email: email@example.com.