Sales Compensation – “Show Them The Money”

Sales Compensation – “Show Them The Money”:from 3forward by Dan Hudson
As we enter the back half of the year many companies are reviewing their B2B Sales Dashboards and sales pipelines and revenue forecasts to determine if they will finish the year on target.  Now is also the opportune time to review your sales compensation program to make sure it is correctly rewarding the desired sales rep behaviors – particularly that it’s incenting those individuals that are doing your heavy sales lifting.

What to Test For In Your Sales Compensation Plan

Sales compensation plan failures can occur because of incorrect modeling on the front end.  What do they get wrong?  It’s not uncommon for executive teams to assign new business/revenue quotas based on unrealistic growth expectations.  When incorporated into a sales compensation formula, these goals can actually dis-incent the sales team if they are considered unattainable.   (This can be compounded if the sales team sees too little investment in much needed sales enablement processes such as lead generation programs).

When to Modify Your Sales Compensation Plan

Many firms won’t make sales compensation changes mid-year because they believe that it creates confusion and mistrust within the sales team.  The reality is that poorly designed sales plans drive complacency and turnover within sales teams.  These results can be fatal to a sales leader.  If your current incentive compensation plans are not working as well as you anticipated, making changes now may energize the sales team and salvage an otherwise dismal sales year.  It can also set you up for a strong start to 2013.

Worried Your Sales Compensation Plan is Holding You Back?  Three Actions To Take Now

1.  Get started by realistically assessing both your current qualified pipeline and the amount of pipeline that can become qualified and closed during the plan year.  The key here is to be brutally honest with these numbers!

2.  Keeping your team focused on high probability targets and sweetening the incentive associated with these prospects will increase the likelihood that you will finish strongly.

3.  Don’t be afraid to over pay a little, it’s better to finish the year at 90% of plan than at 60% of plan.

Setting challenging but achievable sales targets for growing your revenues requires investments in sales people and sales processes.  Take the time now to make sure that your incentive compensation plan is dialed in.  Also make sure that important sales effectiveness enablers (like lead generation) are in alignment with your growth expectations.  You can’t afford a do-over next year!