Tag: commission structure

Is Your Compensation Plan Driving Sales Results?

When building a winning sales team and strategy there are a few principles that are sometimes overlooked. Let’s take a look at five questions that when answered properly should help youth build a compensation plan that inspires your sales team to thrive and keeps your company on track for revenue and profit goals.

1.) What will it take for my salespeople to survive on their income based on our cost-of-living?

While it is true that salespeople should be paid for their performance and that the top salespeople will earn the highest income, you do not want your salespeople worrying about how they will pay their basic expenditures. Maslow’s Hierarchy of Needs makes it pretty clear the physiological and safety needs are requirements for people to perform at a basic level. Fearing how you will pay rent or buy food is not likely motivating your salespeople to sell more. It is likely hurting them and causing them to question their abilities, lowering their confidence, and may be impeding their ability to close.

A base salary should allow someone to at least survive their basic expenses during a difficult month or quarter. If performance issues last longer than a quarter and are not team wide, then we should be working on coaching to a standard or coaching to a new opportunity.

While I suggest a base salary that allows for survival, be careful that the base is not so large that it impedes the company from offering a strong compensation plan for outstanding results while maintaining a comfortable profit margin.

2.) What is most important to my people? What drives the people on my sales team?

This has nothing to do with your compensation plan, but it is the most important question in determining how the compensation plan is promoted to your sales team on an individual basis.

Most people are not driven only by money. People are driven by security, travel, ability to provide for their family, and freedom. These are often afforded through income. The income alone though is not usually the driving factor.

It’s important to spend the time to get to know the driving factor for your sales team. When you are promoting the compensation plan structure and how it will impact their lives, they will be more likely to hit higher goals that will keep your company on track for your revenue and profit goals. Keep your team in mind and ask from their perspective, “What’s in it for me?”.

If I sell $4 Million in product a year, and I earn $X. Pushing me to sell $5 Million to earn $Y will require an understanding of what I would have to give up in order to hit that higher number – training, travel, hours worked, more calls and rejection and comparing that to what I will gain in return – income, freedom, recognition, promotion, significance, etc. If I, as a member of the team, believe the trade-off is worthwhile I will hit the higher goal. If I don’t, why would I put in the extra effort.

When building your compensation plan, consider whether or not you know enough about the people on your sales team to understand what drives them. Then coach them consistently on how to take advantage of the compensation plan to help them achieve their dreams. You will have happy salespeople which will consequently increase your results.

One of my favorite books on this topic is The Dream Manager by Matthew Kelly. If you are looking for a new level of connecting with your team by helping them achieve what is important to them then you should grab a copy of this book right now.