While attending a recent seminar with small business owners, I found myself knee-deep in a discussion about what salespeople really do. Contrary to the business owners’ thoughts on the matter, I proposed that there are ONLY two (2) things a salesperson will do … What you pay them for, and what you measure. Do you agree?
First, let me share what led to this discussion …
A business owner of a $6M company complained that his lone salesman had not brought in a single new customer for over three (3) years. I asked if he had discussed this problem with the salesman, and was told that he had not made it a “big deal.” I also inquired if the salesman often calls on new clients, and was told that he travels frequently to existing clients and tries to see new clients on those trips. I then asked if the company uses a CRM to track proposals and provide forecasting, and discovered that Excel and Outlook were the extent of the tools being utilized. Finally, I queried about the salesman’s compensation plan. I was told the plan was essentially all base salary with a year-end bonus based on the company’s success. Do the responses to my questions raise any red flags?
What you pay them to do …
The old adage, “You get what you pay for,” may not always be true, but if you don’t pay well and have a poor compensation plan, then you will get substandard salespeople (C-Players) and accompanying substandard effort that will not grow a profitable business. A well-structured compensation plan is vital – it is the beginning, middle, and end of the road leading to your company’s success.
Beginning – Without a well-designed compensation plan, you will not be able to attract high caliber “A-Players” who will move your company toward success. By “capping” (limiting variable compensation) commissions, you are limiting your overall revenue potential. Hiring a “commission only” salesperson seldom proves successful, because the best salespeople expect both a salary and shared risk. See my past post for the 5 Keys to a Successful Compensation plan.
Middle – Without a well-defined compensation plan, your salespeople will do whatever will make them the most money with the least amount of effort – it’s just human nature. However, this effort is often NOT what needs to be done to grow profitable sales. The solution is to design and periodically modify compensation plans that encourage activities and productivity to focus your sales team on successful efforts.
End – If your compensation plan is capped or doesn’t allow your salespeople to attain the success they feel is worthy of their efforts, they will find another employer whose compensation plan does. You will lose a great asset for your company and have to start all over again. (Look for a future post “Are you willing to pay your salespeople more then you make?”)
What you measure …
If you don’t pay your sales team for something you better make sure that you at least measure it! If you know that your salesperson needs to have 10 face-to-face meetings to close one sale, then you can either pay for the 10 activities (F2F meetings), or have a metric that you can discuss weekly and monthly – then pay commission for the productivity or sale. You cannot just collect the data – you need to discuss it each and every week. That is measuring it.
The reality is that we are in 2015. Excel is NOT a Customer Relationship Management (CRM) system, and Outlook is a pretty poor way to maintain your communications with customers. A REAL CRM is needed if you want to measure both the activity and productivity of your salespeople – or even your own efforts. Yes, this can be done manually with “tick marks” for calls and a chalkboard for sales (I know, because that is how we had to do it 30 years ago), but we now have productivity tools that are very inexpensive (SalesForce is $25/month/seat) and fairly easy to customize to your specific business. If you haven’t yet invested in a CRM, it’s time to do it now! (I’ll write future posts on this topic.)
The Bottom Line …
Remember, salespeople do ONLY two things – what you pay them to do, and what you measure. Ensure that your compensation plan is well designed to award behaviors to grow your business, and if you don’t specifically pay for it, implement a CRM to measure activity.
