IS YOUR SALESFORCE PREPARED TO PRESENT YOUR COMPANY IN A PROFESIONAL WAY? (PART 4)

COMPENSATING INDIVIDUALS WHO WORK ON A SALESTEAM

Because of the complexity of developing a compensation plan for a sales team, many companies use a pay mix that comprises 100 percent base salary plus a performance bonus based on a percentage of the sales team’s base salaries.  For example, a sales team that has sold 100 percent of quota at 20 percent   contribution margin might receive a bonus equal to 5 percent of each team members’ base salary. While another team that has sold 120 percent of its sales quota at 25 percent contribution margin might receive a bonus equal to 10 percent of each team member’s base salary.

However, while most employees are willing to support their group’s effort, self-interest may cause conflicts with the group’s objectives. And while most salespeople are comfortable with collective evaluation of their group’s performance, top performers may not feel that they are being compensated for their extra effort.  To address these issues, most companies that achieve total market domination employ a compensation mix that depends on individual member’s job function.  For example, the incentive compensation as a percent of TTC may be 30 percent for account managers, 20 percent for product specialists, 10 percent for post-sales support, and 5 percent for administrative personnel. 

Compensating Top Performers

Top performers are often responsible for bringing in a significant percentage of a company’s business. So companies that achieve total market domination put a great deal of consideration into developing compensation plans that ensure that they are able to retain all or almost all of their top performers.

The key to compensating most top performers is to tie their TTC to their own sales performance and to offer a high percentage of incentive compensation with no salary caps and with bonuses for reaching specific sales targets.  However, no matter what compensation strategy your company implements, and no matter how generous your TTC plan is, one or more of your top performers will inevitably leave your company to work for a competitor. 

Companies that achieve total market domination know that the only way to prevent this inevitable turnover is to offer their top performers “golden handcuffs,” in the form of stock options and generous profit-sharing programs, to retain their loyalty.

Customer Satisfaction and Retention

 Maintaining a high level of customer satisfaction can help your company build market share, but it does not always improve retention. For example, if a competitor markets a new product that is less expensive than the one that your company sells, it may win over some of your customers, regardless of your customers’ satisfaction with your company’s products or service.

Many companies that achieve total market domination design their compensation plans to encourage their sales, marketing, and support service to maintain a high level of customer service. However most companies structure their compensation mix so that a much larger amount of incentive compensation is earned by generating new business than by servicing existing accounts.

Communicate Clearly and Put it Writing

Your compensation plan should communicate how every aspect of your sales personnel’s performance, including sales volume, territory growth, product mix, new account development, and customer satisfaction, will help your salespeople  achieve their financial goals.

Your compensation plan should also be clear, concise, and compelling. If your compensation plan is clear, your salespeople will be able to focus their selling activities on achieving your company’s objectives.  If your plan is concise, it will be easy for your company to manage and administer. And if your plan is compelling, it will motivate your salespeople to make their best effort to achieve your company’s objectives. 

Your company’s compensation plan is a legal agreement between you company and its sales personnel. It should be communicated in writing and presented verbally and with an opportunity for your salespeople to ask questions about any points that they do not understand.

If your salespeople do not understand their compensation plan, it will not motive them to stay focused on the accounts and the products that are strategic to your company’s success, and it will not motivate them to make their best effort to reach your company’s sales objectives. 

Step 12: Evaluate Your Sales Personnel

Most salespeople are evaluated on two simple criteria: do they make quota, and do they make trouble. If they make a great deal of trouble, they better excel at bringing in new business. Unfortunately, this “binary” evaluation process does little to help a sales manager improve his or her sales team’s performance.

To understand sales performance, a sales manager must consider a constellation of factors including:

• Size of territory
• Product penetration (saturation level)
• History of sales territory
• Rate of sales growth
• Number of new accounts
• Number of lost accounts
• Percentage of business for “A,” “B,” “C” level accounts
• Number of sales calls, demonstrations, and proposals generated
• Spectrum of products sold
• Size of quota (attainment factors)
• Date of last sale
• Performance against other salespeople
• Customer relations

Each of these factors can signal a potential problem, which if rectified can help weak salespeople meet their revenue objectives. Performance reviews provide an opportunity for upper management to evaluate and reward employee performance. The more objective and relevant a performance review is, the more influence it will have on employee work habits.  Companies that achieve total market domination “engineer” success into their organization by linking employees’ bonuses and salary adjustments to achievement of specific objectives and key results.

Ego and Praise

Most salespeople have never been given any guidance about how to deal with rejection, and they take their customers’ decisions to choose competitive products personally. This is why many salespeople who appear overconfident actually suffer from a lack of confidence in their ability to influence their customers’ purchase process. 

Unfortunately, many managers don’t understand why their salespeople have “large” egos, and they are reluctant to praise their salespeople’s successes.  But companies that achieve total market domination have learned that praise is a wonderful thing.  It encourages salespeople to strive to achieve greater success.  And the performance review process is a perfect opportunity to provide encouragement and support that salespeople need to build real confidence.

Employee Self – evaluation

Many companies have employees submit a self-evaluation form to their manager prior to their performance review. This process gives employees an opportunity to review their achievements since their last review and makes it easier for their manager to complete their performance review.

 Salespeople can be very critical of themselves, but it is important for their managers to be as objective about their job performance as possible. An employee evaluation is most valuable if it is based on events and activities that can be measured and changed. 

Your employees’ attitude is your company’s attitude

Companies that achieve total market domination maintain an open dialogue between their sales team and their senior managers to ensure that potential inflammatory issues, such as disagreements about crediting sales commissions, will not impact their employees’ morale.

 Being respectful of employees and maintaining an open dialogue about issues that they are concerned about can help your company earn the loyalty that it needs to retain its top performers and dominate its market.

Part 5 continues in the next article

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