Understanding how a sales team is measured, what they’re rewarded for, and what they’re dissuaded from doing can say a lot. In fact, it could be said that the best way to predict future success (or failure) of a sales team is to look at their compensation plan.
Here at SellingBrew, we’ve had a chance to hear the behind-the-scenes stories on quite a few compensation plans–the good, the bad and the ugly. None of them are ever perfect, but there is almost always a common thread that runs through the ones that prove to be most successful.
While most companies seem to start developing their comp plan by asking what behavior they want to reward, the best-of-the-best seem to start by taking a rather contrarian perspective…
They start by asking, “What behavior do we want to dissuade?”
Now…they don’t ask this question to build their plan around punishing the wrong-doers. They ask this question so they are sure that they’ve anticipated the unintended consequences. They know that there’s no easy way to go back once that comp plan is in effect. They also realize that every incentive is two-sided…not only will it encourage behavior, it will also discourage other behaviors in turn.
As a simple example, you’d be surprised by how many companies we’ve heard from that built a plan that compensated their team on revenue only to find quarters later that margins took a beating. Not only do those companies never get those quarters back, but they had to reward their sales team handsomely for driving down profitability.
So be wary of focusing on the positive when you develop your comp plan. Be sure you spend at least as much time pondering the behavior you’ll be discouraging as the behavior you want to encourage. You’d much rather discover those unintended consequences now rather than paying for it later.
Designing Sales Comp Plans That Actually Work
For driving salesperson behavior, your sales comp plan is one of the most powerful tools at your disposal. But any incentive you offer can have disastrous unintended consequences. In this guide, learn about four pitfalls to avoid and ten things to consider when designing your comp plan.
How to Avoid Sales Compensation Gotchas
No variable compensation approach is ever going to be perfect, but you stand a much better chance if you're aware of the potential hurdles. This guide exposes the problems with various compensation schemes and explores potential solutions.
