There is a key point missing in the development process of most sales compensation plans. In this episode of the Sales Management Minute, learn the key to constructing an effective sales compensation plan.
In most companies, it’s an accepted practice to pay commissions to sales people. Yet, few executives take a moment of pause and ask themselves why they pay commissions. Most sales compensation discussions center around how much to pay and on what (i.e. revenue, gross margin, quota attainment, etc.). The key element that is often missed is what the company is trying to accomplish by paying commissions to its sales people. In essence, what message do you want to send to your sales people through your sales compensation plan?
Most sales compensation plans fail because executives begin the construction process with commission levels. “How much should our sellers earn at plan?” It’s a relevant point, but not the starting point. There are steps to take before you put pen to paper with your sales compensation plan … beginning with identifying your company’s sales best practices. In essence, what works and what doesn’t. Best practices become process. With a well-defined process, metrics are developed to measure seller performance relative to it. Your sales compensation plan should reinforce the process and metrics leading to your desired revenue results.
See you next time on the Sales Management Minute.
Lee B. Salz is a leading sales management strategist specializing in helping companies build scalable, high-performance sales organizations through hiring the right salespeople, effectively onboarding them, and aligning their sales activities with business objectives through process, metrics and compensation. He is the Founder and CEO of Sales Architects, Business Expert Webinars and The Revenue Accelerator. Lee has authored several books including award-winning, best-seller “Hire Right, Higher Profits.” He is a results-driven sales management consultant and a passionate, dynamic speaker . Lee can be reached at lsalz@SalesArchitects.net or 763.416.4321.