Join Drew Boyd for an in-depth discussion in this video Understanding sales compensation, part of Sales Management Foundations.
- A sales manager does four things. Define the sales task. Define the structure. Create competency and measure results. But hey, what about paying the sales team? Isn't that important? It certainly is. Your sales rep compensation program touches all four major roles of the sales manager. Let's explore it in more detail. Managers have a variety of sales compensation schemes to use. The key is to select one that is market competitive, and that drives the right behaviors in your sales reps.
Compensation can affect the number of sales calls a rep makes, the quality of that sales call, and how much time a rep devotes to the job. So what behaviors do we want? By now you should know, we want to directly link our sales compensation program to the sales task. Who do we call on? What products do we sell? What activities do we want to succeed? And what interactions do reps have with others in the company? Compensation can drive behavior in all four areas of the sales task.
Creating a sales comp program takes a lot of work. So it's important to get help from others within your company, such as your finance and human resources departments. A good sales comp program is simple, fair, flexible, affordable, and competitive. To design a sales compensation plan, you first have to assess your current comp program, and determine how well it's working. What are it's strengths and weaknesses? Be sure to look at both quantitative as well as qualitative data.
Is the comp plan aligned with the strategic direction of the firm? Is the plan affordable, within your company's overall business model? Is it competitive with other firms that you compete with? Is the program too volatile in terms of how reps make their money? Be sure to get diverse input when you do this assessment. You should get feedback from your senior management, sales managers, sales reps, and sales support groups. But also include feedback from marketing and other departments, especially ones that are directly impacted by the activities of sales reps, such as your manufacturing team, or customer service groups.
There may be things happening between these departments and your reps, that you're not aware of. A well designed compensation program can affect these interactions by eliminating them, or perhaps promoting them. You may even want to ask your customers what they think about your reps and how they're performing. What would they like to see changed? How can you use compensation to address that? You should also assess how simple and easy it is to administer the current plan. Are there ways to streamline it and make it even more efficient part of your sales management tool kit? What can you do to make it more flexible and nimble when addressing special situations that might arise in the marketplace? A great sales compensation plan links all aspects of sales management.
The best sales managers, are the ones that take the time to design the right one. Let's learn how to do that next.
- Acquiring talent
- Motivating your salespeople
- Forecasting sales performance
- Setting quotas
- Evaluating and compensating salespeople