Is Your Sales Compensation Plan Helping or Hurting?
Specifics for sales compensation packages vary from company to company. Nonetheless, there are four general tell-tale signs that a sales compensation plan isn’t doing the job: lack of clarity, the absence of a proper job description, mass exodus of top performers, and mismanaged quotas.
Recognizing these red flags is the key to making a course correction before the situation becomes unsalvageable.
Unclear Policies and Lack of Documentation
Having a clearly defined and documented sales compensation plan and policy is critical. Without a clear system in place, each sales rep relies on his or her instincts and experience in carrying out their operations, which can lead to confusion over where to focus their time and efforts, and even how incentives are earned. The fix for this situation is simple. Provide your company’s sales reps with a written plan that lays out quotas and incentives, and the rules you expect them to follow. One caveat — don’t go overboard with quota requirements. Building in a buffer against some reps falling short is a reasonable practice, but impossible quotas are not sustainable over the long term.
Lack of Proper Job Descriptions
When it comes to roles on the team, organized and properly documented job descriptions are important. Lack of clearly defined sales territories can lead to bickering over some accounts, while others are neglected. There is also the added complication of lacking a reliable gauge on which to base compensation. Written job descriptions, including pay ranges and assigned territories, hold the key to resolving these issues. You should evaluate your company’s job descriptions periodically in light of in-house developments and industry trends, to ensure they still make sense and evolve along with your company’s growth and are in alignment with your goals.
The Exodus of Top Performers
Retaining top performers is key to remaining competitive in the industry, and sales should be a lucrative career for your top performers. One clear sign that your company isn’t keeping pace with the competition is consistently losing those top performers. Whether seasoned sales reps are jumping ship, or your company isn’t attracting top-level talent, inadequate compensation structure is a likely culprit.
Top performers and promising recruits are like gold and should be rewarded with good compensation.
A big challenge businesses face is determining the right quota level for their sales force based on their current and future revenue. Of course, there is no one-size-fits-all solution to managing quotas, but last year’s performance is not necessarily an indication of next year’s performance – and can lead to unrealistic quotas.
Personal circumstances and market forces each play a role in determining how strong sales reps perform.
Too many performance measures can also get in the way of making reliable predictions. The solution is to rely on no more than three performance measures for quotas, with the bulk of sales incentives focused on a primary measure that aligns most closely with your company’s strategic goals.
Are you looking to improve your current sales team’s effectiveness, accountability, and capability? If so, I’d be happy to meet and talk further about your challenges and goals.
Want to learn more about sales consulting and sales strategy? Read about various sales topics in our sales consulting blog.
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