Is your sales compensation program actually sabotaging your results? It probably is, if it’s guilty of the frequently committed faux pas detailed below.
They’re from Alan McAnally, sales consultant and president of Andover, Massachusetts-based SalesComp America, in an article on the company’s website. We’ve abstracted the gist of these sales force killers here.
Killer #1. Never Involve Your Salespeople in Compensation Design
It’s common for people “upstairs” to design programs that are counterproductive. What to do? Ask your sales force what they think of your current policy. You might be surprised, says McAnally. You’ll get insight into their morale, motivation, and expectations.
Killer #2. Use the Hiring Letter as a Plan
Too often, companies try to establish their incentives plan with a short sentence in an offer letter such as, “If you sell X amount of our product, you’ll get a payment of Y percent of sales.” That keeps it quick and simple. But what about these situations, which are going to come up:
- Late payment or nonpayment by customer (Is there a penalty?)
- Territory or account assignment changes (They’re going to happen.)
- Windfall sales (What’s the definition? Is there a cap?)
- Unprofitable sales (What’s the consequence?)
- House accounts (Always a challenge.)
- Split commissions (Needs a very clear definition.)
These situations—and probably others unique to your specific environment—need to be defined as part of the offer of employment, says McAnally. Salespeople just want to know the rules.
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Killer #3. When You Pay, Pay Late
It is not unusual, says McAnally, for incentive checks to be delayed because they are not part of the regular payroll system. It’s the financial people, he says, not the sales managers, who cut the checks, and when they get backed up, they allow themselves some slack by being late with incentive payments. Make your financial people treat incentive deadlines as seriously as period closing deadlines.
Killer #4. Leave Out the Supporting Data
In many organizations, says McAnally, incentive checks just appear without supporting data. Especially when the check is lower than the salesperson expected, this creates problems. Always provide the data that show how the amount was calculated. As long as it conforms to the agreement, individuals will accept it.
Killer #5. Constantly Make Changes to the Incentive Plan
Salespeople know that there will be some changes, promotions, and special situations. But if you change the program constantly, they never know what their objectives are. You want them comfortable with the plan’s provisions and measurements, says McAnally. By the way, a good plan does not have to change very often, he adds.
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Killer #6. Set Earnings Ceilings Too Low
An excellent way to drive your salespeople to the competition is setting unrealistic ceilings on earning power. Salespeople know that there are likely to be some defined upper limits to their compensation, and rules addressing windfall sales have been long accepted, but be careful. In general, companies are well served when motivated salespeople know they have the opportunity to “earn big for big results.”
Don’t put the brakes on salesperson enthusiasm and earning power until you have carefully thought out the justifications and ramifications, says McAnally.
In the next Advisor, more ways to incentivize your best salespeople to leave, and a look at an extraordinary compensation management program that might just help get them to stay.
To a British audience one of the aotarctitns of Bradford is that he plays the underdog. One of the things that we really like is an underdog. McGill is rather in the tradition of Philip Marlowe; the knight in tarnished armour who is more interested in remaining honourable than in getting rich.When we have a really wealthy character like Danny Wilde, we like him because he has a sense of humour. The British TV action heroes such as John Steed or Jason King are aware of the ridiculousness of the stories that they are appearing in. Simon Templar seems to be aware that he is being watched by a TV audience and talks to them directly at the beginning of each episode.Stuart Damon in THE CHAMPIONS and Joel Fabiani in DEPARTMENT S share the sense of cool that Bradford has. Is partly about the 60s counter-culture, but it also goes back to stars like Bogart, who are able to be part of what is going on, but also able to stand back and look at with a sense of distance.