Sales Compensation Blog

Recession.  Down market.  What’s happening to sales? If you find yourself in this situation, read on. While sales comp alone isn’t an answer, there are many levers you can pull to help.

For starters, you should immediately look to the information stored in your commission system for analysis. Here you can  see if you are paying for performance; see blog entry, "Are you Paying for Performance", carrying poor performers, or  have any super stars. If you look at the performance distribution curve, you will have a great starting point for optimizing your team.

With this perspective in mind, the top strategies are:

•         Optimize your productivity
  
•         Look for new market opportunities
  
•         Reduce costs.

Look for new market opportunities.  Now is the time to analyze your customers and identify any patterns of success. You may find that certain products are more profitable than others or you are getting traction in a particular vertical. Once you have identified a new market opportunity, changing the compensation plan to focus reps on the new area will reap immediate rewards.

Reduce costs. Many companies we are working with are combining the strategies above with lowering the base salary and increasing the upside incentive potential. With clear plans and a more lucrative upside, they are able to keep teams motivated while lowering the fixed salary cost.

These are a few ideas.  Come to our free webinar on Dec 10th "Sales Compensationfor Tough Times" to learn more.

Recently jobs have been either flat or up slightly year over year. This year it appears the TTC is going down for some jobs.

Are you planning on reducing your TTC next year? Reducing TTC is like a pay cut and can have negative effects on the motivation of your sales force. If you reduce the TTC, how will you keep the sales force motivated while taking away real earning capability?

Will you reduce the quotas or goals to reflect the reality of the economy? Remember when developing a good sales compensation plan you want a team of winners, so the goals may need to be adjusted downward so that even in this economy at least 50% of your reps are at quota or above.

Have you thought about increasing the upside, handsomely rewarding the reps who exceed their quota in this economy? An enhanced upside potential may be just what you need to soften the blow of lower TTC.

Teanna Spence
Compensation Director
Makana Solutions

Companies often spend a lot of time and money trying to design the optimal, most effective sales compensation plan. They may hire consultants, review detailed earnings history or run various analytics to ensure their team plans are good for the business. In doing so, they sometimes overlook the fact that the comp plan must be motivating for the sales team as well. It must reward the team close to the point of influence and provide them the right incentives throughout the year. What is one of the easiest and quickest ways to know if you are properly motivating your sales team  ASK THEM! Ask your sales team directly. A true team of professionals will tell you whether or not their sales compensation plans are motivating. I found by surveying the entire team, and then discussing the results and suggestions with a subset or core team yielded much better plans, and hence much better performance. When you include sales team input into your plan design, the team actually takes more ownership of their earnings potential and there tends to be less conflict or confusion around payouts. By asking them, you are also showing that you value their input and recognize them as part of the equation. You can ask them in person or with an online or printed survey. Using an online survey tool, live survey monkey - (free at www.surveymonkey.com) allows you to make it anonymous if you feel that you will get more accurate results that way.

Here are 7 basic survey questions you can ask your team:

1. Do you know what your goals are? Do you clearly understand them?
2. Do you feel your goals are achievable?
3. Do you find yourself focusing more of your attention on any one goal? If so, which one?
4. Do you clearly understand how you get paid, and what you need to do to get into your accelerators?
5. Have you run into any conflicts or found yourself competing with someone on your team (direct or channel) over the same deal or account?
6. Do you clearly understand company goals?
7. Do you have suggestions on how to improve your current plan that are in alignment with company goals?

Sometimes the obvious path eludes us, but is often the best. Let us know if this has worked for you.

Larry D'Angelo
VP Business Operations
Makana Solutions

Lately I've been hearing about surprise ‘overpayments' and how distressing they can be. Helping companies avoid such surprises has been an important part of my goal of delivering software to help people manage their sales compensation.

In the past, I was focused on eliminating overpayments by reducing errors in commission calculations through automation. I have worked with many companies who found that when they replaced their spreadsheets with a commission system there were all kinds of overpayments to reps based on human error intrinsic in the use of spreadsheets. Of course, sales reps are MUCH less likely to report overpayments of this type so the automation process uncovered many such flaws. One company I worked with said "We know we are overpaying about $2M per year. We don't plan to recover it, but can you please make it stop?"

Now, with Makana's focus on plan design, I've discovered a more disturbing ‘overpayment'. Many of the companies we are working with now did not understand how to model their cost exposure prior to rolling out new sales compensation plans to their employees and channel partners. So they accidentally designed plans that would pay more than they intended for the results they were seeking to achieve. In many ways, these kind of ‘overpayments' are much worse to deal with. For starters, you are contractually obligated to pay them, so mere knowledge of the problem doesn't provide you any means of recovery. Furthermore, you typically don't find out about the problem until you are faced with signing a very big commission check. OUCH.

So this year, spend some time modeling the plans before rolling them out to the team. Look at your cost exposures for overlay positions, windfalls, quotas set too low etc. Correct the problem before it happens.

When you hire a group of hungry sales reps, do you ever envision them getting "satisfied" and not selling as much in years 2,3 and 4? Probably not however this scenario gets played out time and time again due to compensation plans that drive that exact behavior you fear. Your hunters have become farmers!

What is the cause of this phenomena? Comp plans drive behavior and the plans are essentially telling the reps to stop selling. A plan that is designed to garner new clients and retain customers will become ineffective if a company grows quickly. The compensation for account management may exceed the compensation for new business once a baseline of accounts has been established.

Adaptation to a quickly changing selling environment is necessary for young companies whose growth quickly outpaces stale or early stage sales compensation plans. Too many companies try to stick to old plans to reduce change only to see sales revenues decrease and sales effectiveness slowly deteriorate.

The answer lies in role definition. As a young company, it makes fiscal sense to have one sales rep take care of both new business and existing customers. If the customers need constant contact to remain a loyal customer, then you will have to compensate the rep for this work. However at some point you will need to separate these two tasks into separate job roles. Account managers and sales reps can be compensated in a way that creates a unified selling environment while at the same time bringing back into alignment that old adage, "gain for top performers and pain for the non-performers".

 Chris Mason has over 20 years of direct selling experience and has managed both account managers and direct selling reps. For more insight into creating sales comp plans please go to our website, MakanaSolutions.com

Have you taken the time to really evaluate the job roles in your company? With new sales plans on the horizon, now is the time to define your job roles. Defining the job roles correctly brings clarity to the sales organization. Clarity will help razor focus the sales reps in the right direction.

Signs that you need to look at your job roles:

• Reps are unclear who should be servicing a customer
• Customer sees multiple reps from your company
• Reps are unclear what they should be doing
• Everyone is selling everything to everybody

When a company is young with few sales reps, it is very common to have only one job role. Over time as a company grows and changes without proper monitoring of the job roles they can easily stay blended together. The resulting confusion can hurt revenue, moral and possibly customer relationships.

5 Steps to develop sales roles

1. Align sales roles with customer facing roles
2. Define where the rep should spend their time
3. Evaluate rep control over close of business
4. Identify the product stage
5. Check role alignment with company strategy

A good place to start is to align the sales roles with the customer facing roles in this chart. Are the reps generating leads, closing the sales, managing accounts, etc.? To help you understand the current job roles, assess how your reps are spending their time. Are they developing new business, servicing existing customers, etc.? Is this where you want the reps to spend their time in the future? 

The next thing to look at is the amount of control the rep has over the close of business. Does the rep close the sale or is the rep part of a team that supports the sale? Do they have ownership over the sale or are they in a support role?

Finally look at the product stage. Does the rep sell new products, current products or both?

Clear concise job roles avoid confusion between the sales reps in your organization.

Everyone knows who their target customers is and can focus their attention in the right place.

Now that you have defined the sales roles, step back and look at them together. The job roles must support the company strategy. Make sure that the company is covered and there are no gaps in the organization and people are not stepping on each other. Makana Motivator helps you achieve job role alignment through easy cross plan view analysis.

Teanna Spence
Compensation Director

Makana Solutions