No matter the size of the company, no matter the nature of the industry, and no matter the products or services being sold, sales professionals are typically paid differently – via sales compensation plans – from other employees. And rightly so! After all, without sales reps on the front lines bringing in customers and revenue, there would be no money to dole out to the staff, cover other company expenses, or fuel corporate growth. But what if sales team members aren’t satisfied or motivated by the sales comp plan? What are the risks? And more importantly, what are the benefits of a better sales compensation plan (and how can you realize them)?
What Should Sales Compensation Plans Include?
According to compensation expert Cassandra Faurote, writing in Compensation Sense 101, sales compensation plans for employees in direct or supporting sales roles typically include “the base pay they receive, as well as … variable pay … in the form of a bonus, incentive, or commission for sales they close.” Of course, other perks and benefits can come into play as well, and the structure of sales comp plans can vary widely. When competition for top sales talent is fierce, sales team managers and executives must often get creative as they factor in attractive and motivating sales comp plan components.
The Risks of a Poor Sales Comp Plan
Motivation is a key benefit of a well-designed sales compensation plan (more on that later). But if the sales comp plan is poorly designed – or poorly implemented, administered, or communicated – motivation suffers. Do you really want unmotivated sales reps being the face of your business? Think of the possible damage not only to your bottom line, but also to your company’s reputation, if that happens.
Company loyalty – from your customers AND your sales reps – can suffer irreparable harm if the sales comp plan is de-motivating. Compounding this is the likelihood that replacing dissatisfied sales talent will be more difficult if sales compensation is subpar.
And the biggest risk of all, of course, is that revenue drops and the company’ future becomes uncertain!
Benefits of a Better Sales Comp Plan (and How to Make It Happen)
So, obviously, a well-designed and executed sales comp plan can motivate reps, improve employee and customer loyalty, and boost revenue for long-term growth and company viability! To make that happen, Faurote recommends viewing sales compensation “through a different lens, giving due consideration to … pay level targets, pay mix” [between base and incentive pay, for example], as well as “upside potential, components and weightings, the mechanics of the salesperson compensation program, and how to implement and communicate the plan.” For the majority of sales organizations, we find the compensation mix that generates desired results is 50% base salary and 50% variable. Sales reps work harder when they are not capped on their compensation.
The Bottom Line:
Data collected from small to mid-size businesses taking the Sales Xceleration® Sales Agility Assessment shows that 70% of organizations are not seeing their compensation plans bring the desired results. Designing, implementing, and managing a better sales comp plan can be challenging, with many factors, internal and external, coming into play. Our licensed Sales Xceleration Advisors, serving as Outsourced VPs of Sales, bring the experience and expertise to build revenue-boosting sales compensation plans. To connect with an Outsourced VP of Sales in your area, click here. Or contact us today at 844.874.7253.