Six Sales Compensation Tips for Sales Managers
Research shows only one in three companies succeeds when making organizational changes. Managing through employee perceptions and maintaining expected performance is perhaps the most difficult part of a transformation, yet it’s the most important aspect to get right. So the question remains, “What can a sales organization do to shift the odds in its favor?”
Today’s business environment forces sales organizations to change almost constantly. Technology evolves, competition intensifies, markets become volatile, and customers grow more demanding. Organizational change can encompass simple things such as installing new software or more complex items like rebranding, new sales strategies, or big mergers and acquisitions. The change always starts at the top, macro-level, but flows downward rapidly until touching the salesforce.
Change can reverberate through an entire sales organization, influencing every process and policy.
A change in sales strategy will often necessitate an update of your sales compensation plan. For example, when launching a new product line, you might increase a commission rate in order to influence sales behavior and maximize revenue.
The burden of communicating a sales compensation change falls many times on sales managers, who are often unprepared to guide their salespeople through the conversion. Failure to adapt to new sales compensation practices often is due to how managers present or implement the change, and the natural resistance people have towards it. Managers should explain where sales compensation comes from and how it is calculated.
How to deal with resistance to change
Here are some tips on managing a sales team when they are reluctant to organizational change:
- Communicate early with more experienced salespeople, who are often the most resistant to change. Involve them in the change process with clear roles and responsibilities, and you will get their buy-in more easily.
- Poll your sales force to find reps who have a history with the type of new sales compensation plan. For example, if you are switching from commission to quota-based pay, check if they’ve ever had pay dependent on quota attainment. They can explain the plan’s benefits to their coworkers, lessen resistance to change, and drive positive behaviors.
- Make sure you train everyone on the new sales compensation plan. Get them to understand any changes and refocus sales behavior if needed. To make this process successful, update and reinforce sales best practices.
- Compensation changes can be significant and result in job dissatisfaction or even turnover. To prevent it, consider giving sales reps a short-term fixed guarantee after a new plan goes live. This will help them get used to the changes without being at a disadvantage from the start.
- Provide ample reporting that explains the benefits of the change. Show the sales reps what they would have made under the prior plan versus what they will earn under the new one. Also, share the sales results and any improvements coming from the organizational change.
- To reduce anxieties, build a rock-solid communication plan. Customize the materials for the different categories of sales reps moving into the new sales compensation plan. If you get in their shoes to explain changes, your team will eventually manage to shake off old habits and become familiar with the new status quo.
Get more communication tips from the Six Steps to Communicate Sales Compensation Plans.
When organizational change impacts sales compensation, it affects many people other than the sales force and management. Getting through the change will initially mean more work for them while they adjust sales processes, software, reporting, financials, etc.
- As one of the primary owners of compensation programs, HR needs to understand how the organizational change will impact employees from both a personal and a business perspective. They may need to update policy/procedure documentation, job aids, etc.
- Finance/Accounting must make sure the payroll system will support the structure of the new sales compensation plan. They might also need to adapt their reporting methodologies.
- Sales Operations may need to change their systems, calculations and processes, whereas IT should learn what the business needs under the new compensation plan and apply it to internal tools.
Because they are responsible for sales results, sales managers must learn to drive, manage, and motivate new behaviors. They often have to change the way they interact with their teams. All managers should actively guide salespeople through an organizational change, no matter how large.
Changing a mindset is hard. Remember that, at the end of the day, the salesforce needs to understand why the sales compensation plan is changing and what the overall impact could be for not only the organization but the individual sales rep as well.