Is Your Sales Compensation Plan Encouraging Bad Behavior?

Great revenue and margins aren’t just a function of the product you are selling. The way you are selling it is equally important. Imagine having a great product in the market, with no one to sell it! It’s safe to say that the selling behavior of your team drives your revenue and bottom line. But what drives this selling behavior? Ideally, your sales compensation plan should take care of it, if it’s designed well and is understood by your sales team.

Bad sales behavior stems from poor motivation.

Bad sales behavior stems from poor motivation, which may arise from a poorly designed sales compensation plan.

However, not everything follows a linear logic, and behaviors can easily get out of hand. Let’s first look at what is undesirable behavior by a sales team and how can we identify it.

Undesirable behavior is, to put it simply, a series of wrong or unwanted choices a sales person makes during the sales process, such as:

  • missing out on cross-selling and upselling opportunities
  • selling at margins lower than what is agreed in the organization
  • non-adherence to regulation and compliance
  • inability to maintain standards and follow best practices
  • failure in developing and managing customer relationships
  • inadequate collaboration with team members
  • ineptness in forging strategic relationships with the sales leadership and peers

When your salesforce exhibits undesirable behavior, you need to identify the root cause. The closest cousin of undesirable behavior is poor motivation. The way the sales compensation plan is designed tells only half of the motivation story; the other half consists of many factors controlled by the sales organization. Think of these as a series of choices an organization makes during the sales process, such as:

  • lower payment frequency than prevalent industry norms
  • lack of transparency in plan calculations and dispute resolution
  • ineffective territory distribution
  • insufficient training and coaching
  • long sales cycles
  • unsatisfactory time-off policy
  • too many administrative overheads
  • zero or inadequate recognition and reward for exhibiting desirable behaviors

You can choose to use either positive or negative reinforcement to drive desired behavior. Typically, positive reinforcement works better in the long run and is more effective in modifying behavior permanently.

Let’s look at some ways to do that. If you can handle these two aspects well, you can nip undesirable behaviors in the bud.

  1. Know your salesforce well and use that knowledge.

Find out what motivates your sales reps and segment the team accordingly into behavioral groups. For the rock stars, bigger targets and the promise of higher payout is the most obvious motivation. Then there are the steady ones, who clock in their time, fill up the client information, and manage to more or less meet their quota. For them, bigger targets may not be the right motivation. Rather, they may respond better to recognition, perks, or a change in profile. Similarly, the bottom pile of performers would need a totally different motivation strategy, a mix of specific coaching and prodding.

  1. Design a well-rounded sales compensation plan.
  • Make the plan challenging but simple to understand: Design sales compensation plans which challenge the salespeople and align them to the objectives of the organization. Do not create sales compensation plans that confuse them with too many ifs and buts resulting in demotivation. Build a plan that has motivational factors for each sales person, so that they can capitalize on those opportunities.
  • Conduct plan health checks: Conduct sales compensation plan health checks at regular intervals to incorporate corrections at every stage. Sudden changes in the market regulations, consumer behavior, and new competitors are some factors that can pivot the sales strategy.
  • Contests and gamification: Conduct contests regularly and gamify the sales process. There is nothing more motivating than a contest within the sales organization.
  • Educate your sales force: Training the sales force about the product and services is a must, as it enables them to sell effectively. At the same time, reviewing and analyzing wins and losses helps them understand the right behaviors that lead to more closed deals. However, you must also educate your sales team about the sales compensation plan and tell them how they can use it to make more money. If they do not understand the plan, they will not modify their behavior and will continue selling the way they know.

A great sales force always pushes the envelope when it comes to sales. Paying extra attention to the organizational factors that might be affecting motivation indirectly can make a huge difference in the long run.

This article is part of a series dubbed The Cost of Doing Nothing.

7 Steps to Designing an Incentive Compensation Plan that Drives Results

Most companies are dissatisfied with their compensation programs. Read this guide to learn how to design a comp plan that gets results.

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Mazhar Shaikh

Senior Consultant

Mazhar has 4 years of experience delivering end to end sales performance management solutions.

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