Imagine if, during your typical workweek, you had to deal with rejection throughout the day. Imagine hearing dozens of “noes” and yet picking yourself up every time with a big smile on your face and a new dose of enthusiasm. That’s tough. You may wonder what keeps them going forward. How do they maintain their energy and optimism? The answer is motivation. And motivation comes with proper sales compensation.
Sales compensation is a powerful tool when it comes to influencing sales behavior and improving sales performance. But for most companies, designing an incentive compensation plan that motivates the sales force and spurs specific behaviors is a major concern. As it should be: Nothing matches the power with which sales compensation inspires sales performance. Peak Sales Recruiting’s 2019 Sales Compensation Study found that only 25% of respondents were satisfied with their compensation, while 39% were neutral and 30% dissatisfied – and dissatisfaction can result in losing top competitors to competitors.
So, how can you design incentive compensation plans that will keep your sales force motivated and continually push them to reach new heights?
1. Align sales reps’ targets to company goals
Aligning your goals for the sales team with company objectives is paramount when building a plan that works for everyone. What is the organization’s most pressing current need? Acquiring new customers? Customer retention? Proﬁtability? New product distribution?
If acquiring new customers tops your company’s agenda, design a plan that rewards signing new clients. Similarly, if all eyes are on launching a new product, consider introducing a sales commission or bonus opportunity to reward sales reps specifically for their contribution to a successful launch.
But no matter what your organization’s immediate focus, ensure your incentive compensation plan is easily adaptable. In order to stay relevant and keep your business growing, changes to the plan, whether strategic or structural, must be easy to implement. When corporate or market changes hit, or a merger or acquisition requires unexpected adjustments on everyone’s part, you’re going to need that built-in flexibility. If sales leaders are able to make quick modifications to the plan and by extension drive specific selling behaviors towards achieving new goals, the entire organization gains agility and flexibility.
2. Find the optimal pay mix
There’s no question that money is the most powerful motivator for reps. Whether you want to entice successful salespeople to join your company or ensure that your top sellers don’t leave, you need an incentive compensation plan that is at or above market.
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Once you decide how much each rep will be paid in total, you need to determine the right mix of base salary and commission. In your plan, the ratio between base pay and commission may differ from rep to rep: An experienced salesperson, for instance, might demand a higher percentage in base salary, while a rep who’s just starting his career may be willing to work almost exclusively on commission.
3. Set fair and achievable goals
When incentive compensation plans base rewards on sales goals that are almost impossible to achieve, reps get frustrated and lose motivation. The best incentive compensation plans challenge salespeople while at the same time rewarding them for meeting reasonable target levels.
4. Keep the incentive compensation plan simple
Plans that are written in legalese or weave in an abundance of unnecessary components may well backfire. This is due to the simple fact that they may not be understood, and therefore result in reps reverting to methods that may have worked just as planned to achieve previous goals but bear little relation to current company objectives. Say, for instance, that your company has recently launched a new product. The compensation plan has been redesigned to incentivize reps to sell it, but most of your salespeople have such a hard time deciphering the message, they just continue to focus on selling the old products. The result: Everyone loses money, and the launch goes nowhere.
On the contrary, well-written incentive compensation plans clearly indicate the company’s goals, the outcomes that will be rewarded, and the exact amount of money salespeople will receive for meeting targets. Your reps will spend less time worrying, and more time selling.
In addition to facilitating compensation plan communication that’s direct and accessible, a sales performance management (SPM) solution can make life easier for both leaders and the sales force. A solid SPM solution will not only provide reps with the opportunity to ask questions but will also, when necessary, allow them to quickly convey compensation issues to administrators. Equally important, access to commission registers and reports will enable them to answer their own questions by viewing and drilling down into results. When implemented correctly, an SPM solution improves sales satisfaction and serves to motivate your team.
5. Make timely payments
If you want your plan to induce specific desired behaviors, you need to make it effective as soon as you know the objectives your company is striving to meet. When your salespeople achieve their target, they should be rewarded immediately, and when they fail to meet their goals, the loss should be reflected in their paycheck.
For a sales rep, every workday has its difficulties, and rejection is just one of them. But knowing the challenges salespeople experience and the incentives that drive their best performance will help you build a strategy that infuses your team with the confidence and motivation it needs in order to achieve sales success.