Hunting High & Low for Proper Sales Compensation Plans
Here’s how to take the complications out of coming up with sales compensation plans.
SALES COMPENSATION is a subject that all our clients want to better understand to drive profitable sales and sustainable revenue growth. I have studied this subject as a consultant, and designed compensation programs for my own sales teams and for my clients. Everyone wants a magic formula that delivers consistent results each and every time. I will now begin the fairy dusting.
Well, there sort of is and sort of isn’t a formula. There is not a single compensation program that can motivate all sales teams that I know of today. There are some tried-and-true principles I will share that may help you rethink your compensation program to motivate your teams. Sales teams can be incentivized to deliver better results if you first understand what motivates them individually and then as a group.
I know what you’re thinking – whoa, Paul, you aren’t suggesting individualized compensation plans, are you? That would be a nightmare to administer! My answer is … yes and no.
Segment Your Sales Teams by Their Mission
Think about this as if you are a coach of performance in specific areas of sales growth. It is how they keep score, not what makes them leap out of bed to go slay sales dragons every day. That is a “different animal” we will talk about in a future article. However, there are some key questions, biases and situations you must think through as you start the journey. Here is a three-point segmentation strategy to get you started.
â– Salary-minded “small-game hunters” take on shorter sales cycles. The sales cycle will be different for SMB, strategic or residential accounts. If your sales force and their closing cycle is a one or two sales call close, you will need a comp plan that pays for volume in monthly cycles. The shape of this type of sales team can be described as “instant gratification” for results. A comp plan that unduly extends payment will de-motivate this type of sales team. The salary component should be adequate to keep the rent paid, gas in the car, but not so much that steak and lobster are on the menu a few times a week. This is the hunger factor that drives sales teams that have decision makers in front of them and continually strive to position their solution as a prospect’s best choice. Keep the plan simple, easy to understand and one that supports your business goals of profitable and fast turnkey installations with recurring monthly revenue (RMR) components. RMR should be compensated to drive every sale if you want to have a resilient business. Now let’s move on to the next tier of salespeople.
â– We call this group the “deer hunters,” and they focus on growing your customer sweet spot of larger projects. These jobs are probably built on more than one system, integrated if you will, are locally or regionally based, and represent a longer selling cycle. These may take three to six sales calls to close the deal. This involves qualification, needs assessment, expanding influence to multiple departments, a thorough site survey, and careful product selection. Hopefully this sale will include a decision- maker dialogue or presentation. They sell with a different mindset, looking at the longer game plan and require more of your company resources, such as estimators, project managers, and even your help to influence the selling process in “like rank team selling” (LRTS). The deer hunters typically require a larger salary to acknowledge the longer sales cycle and a lower blend of commission and bonus opportunities to round out their comp package. Now let’s talk about our big-game specialists.
â– “Elephant hunters” go for the mega projects, customers and strategic opportunities for growth. They are involved in very long sales cycles that can stretch into years. Think of them as the orchestra conductor who “conducts” customers’ different sections and your company’s different sections to make beautiful music together. They are the chess players versus checkers players in the game of sales. This sales position can also be referred to as business development or a rainmaker. The good ones are far and few between and require unique compensation packages around their individual needs; call it highly customized comp packages. Typically a large salary, participation in long-term revenue streams, bonuses and perks are normal. They play a significant role of putting your company on the map in new markets.
In summary, your various sales teams have different motivations and need different comp packages to incentivize them to do their best work. Start with a solid hiring process and skill assessment process to ensure you identify what type of hunter you are trying to compensate. We have developed a process to help our clients identify, recruit, hire and motivate their sales teams to deliver food on the table.
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