Is Your Sales Force Working For You? Using Sales Compensation To Drive Growth

Is Your Sales Compensation Plan Holding You Back?

A solution provider's sales force can be a major force for growth when properly motivated. And a poorly designed plan can be a serious obstacle.

"I think it's very important to make sure your salespeople are the driving force behind your growth," said Kristin Rogers, owner of KMR@work, an SMB channel strategies consulting firm, in a presentation at UBM Tech Channel's recent XChange Solution Provider conference in Orlando, Fla.

How much of an incentive plan should be base compensation vs. incentives? Do quotas work? Do vendor spiffs get in the way? What goals should a manager keep in mind when designing a sales compensation plan? And do you need a separate sales force for services vs. product sales?

Here's some advice for solution providers wrestling with the sales compensation dilemma.

The Problems With Sales Compensation

"Is compensation driving behavior, or is it driving you crazy?" Rogers asked in her presentation. Ask yourself these questions:

* Does it take too much time to administer?
* Are sales representatives spending too much time tracking their compensation?
* Is your sales compensation failing to motivate sales representatives to sell the right products and services to drive growth?
* Are your sales compensation plans not the best for retaining staff and attracting new talent?

Sales Compensation Myths

Myth 1: Compensation alone drives behavior. "To me, compensation is an integral part of the strategy, but it's only one part of it," Rogers said.

Myth 2: The more elements to a compensation plan the better. Compensation plans should be simple, clear and in writing.

Myth 3: The comp base must be big to attract the best people. Consider the whole plan, not just the base.

Myth 4: Quotas are the best way to drive sales growth. "I'm actually not a big fan of quotas," Rogers said.

Myth 5: One-size plan fits all. Different types of representatives need different plans.

Goals For A Sales Compensation Plan

* Attract skilled and experienced people.

* Align the sales force with a company's strategic and financial objectives.

* Reward, retain and reinforce your sales representatives.

"The longer your salespeople are with you, the more successful they're going to be [and] the more successful you're going to be. So you've got to have a plan that's going to make them happy," Rogers said.

Rules To Live By

* The sales compensation plan must be aligned with the company's strategic goals.

* Consistency and predictability in a sales compensation plan are critical. Rogers suggests changing them only once a year -- if you have to.

* Keep the compensation plan simple. "Salespeople need to, in the middle of a transaction, be able to calculate how much they're going to make," Rogers said.

* Sales compensation plans must be in writing.

* Make a conscious decision about the balance between base compensation and incentives.

The Trouble With Spiffs

"Spiffs need to be used in a constructive and productive way," Rogers said, noting that spiff offers from IT vendors can misdirect a solution provider's sales force. She related one experience where sales representatives sold printers below cost in order to earn the manufacturer's spiffs.

* Avoid spiffs that can lead to products being sold below minimum prices and margins.

* Manager approval should be required for participation in spiffs to ensure they are consistent with company objectives.

* Reserve the right to reset spiffs distribution.

Offering The Right Compensation For The Right Objectives

* Provide strong incentives/accelerated compensation to encourage sales reps (especially longtime employees) to prospect new customers and reactivate dormant ones, not just sell to existing customers.

* Offer incentives to encourage sales reps to sell a broader portfolio of products, more services, etc., not just what they are comfortable with.

* Expanding into new vertical markets means sales reps often have to adopt new sales pitches, value propositions, etc. Offer bounties for successful sales within vertical markets your company is trying to expand.

Getting Sales Reps To Sell Services

Sales reps are often more comfortable selling products. Services are a different kind of sell. Managing customer satisfaction is a bigger challenge. "You're promising a lot," Rogers said. "There's a lot of credibility and competency that the reps are going to get all tangled up in. Services are a very complicated thing to sell."

* Services require a different sales compensation strategy -- and maybe even a different sales force. "I actually do believe that it requires a separate sales force to sell services," Rogers said. "It is a different sales cycle. It is a different type of sale."

* Consider using signing bonuses, rather than commission-based compensation, for reps who bring in services customers.

Tips To Make Sales Compensation Work For Your Company

* Write your company's objectives and sales compensation strategy next to each other. Are they in alignment?

* Understand your local market to stay competitive. Sales compensation requirements in Omaha are different from those in New York City.

* Solicit feedback from your sales force on what's working and what isn't.

* Consider basing some compensation on activity rather than results if achieving an objective, such as breaking into a new market, is going to take a long time.

Tips To Make Sales Compensation Work For Your Company (II)

* Invest in IT infrastructure to improve compensation visibility.

* Use contests, recognition dinners and other fun things to reinforce the right sales representative behavior. "Salespeople are competitive. They like to have fun," Rogers said.

* Reward salespeople who invest in training and certification.

* Rein in spiffs.

* Use noncompete agreements.