When you set objectives and integrate them into your incentive plan, you change sales behavior. This is a known fact. But compensation is more than standard practice, it’s a business strategy—one that’s integral to keeping your team rowing towards a shared set of company goals.
This isn’t anything revelatory. People follow the money. But strategic and dynamic placement of these incentives is vital as compensation plans are the most concrete way to communicate what’s expected from your sales team—or any team.
I’ve seen variable incentives work for pushing marketing teams to pull in a certain type of lead and even encourage controllers to get the payroll in by a specific time with little to no errors.
The question, then, is that if you can measure it and the operation is critical to your company’s success, why don’t you have a payment system around it to drive the necessary behaviors?
I’ve found the answer is “not sure how” or it’s a case of “easier said than done”—especially true when companies still deal with the manual tedium and room for error of spreadsheets. But regardless of the technology you are using, there are a few sales compensation practices that I’ve found too many companies ignore.
Sales Success Starts with Measurements
You can’t know if you’re winning or losing if you have no idea what counts as a point. Simple enough, but are you and your reps clear on what is being measured? A measurement is the gauge of success for what you want to achieve. Start from there and prioritize your goals so they’re aligned with certain sales roles (I’ll cover this in the next section). For instance, which of these goals do you want your team to hit out of the park?
- Top and bottom line growth
- Market share
- Customer satisfaction
- Strategic product revenue growth
- New account acquisition
- Top talent retention account/revenue retention
Say you chose customer satisfaction. Now you have two critical points of information. One, you know what you’re measuring. Two, you have a general idea of where you can focus on placing incentives to keep customers happy. Here “where” really means which role, one of the most important sales comp considerations.
Incent for the Sales Role
Sales leaders need to understand the organizational and payment considerations of each sales role. Typically and depending on company size and product, you’ll see the following make up in a modern sales team:
- Captain aka sales managers
- Farmers aka account managers
- Hunters aka frontline sales reps
- Prospectors aka SDRs, BDRs, ADRs, etc.
- Specialists aka sales engineers or solutions consultants
Every individual position plays a critical role in your sales ecosystem—indirectly and directly affecting the success of the other. This means being aware of how one role affects the pay of the other.
For instance, specialists and farmers could hinder each other’s performance. The reason being that specialists must communicate complicated matters to prospects that could mean the difference between a closed deal or a dead one. And on the other side of the table, hunters that are incentivized to bring in any deal may waste the time of specialists.
Your incentives have to be designed with these considerations of overlap in mind or you’ll find that the balance of your sales ecosystem will be weighted too far one way or the other, negatively impacting performance overall.
Pay Early, Pay Often
Speaking of negative impacts on performance. When you pay matters more than you think. Pay early, pay often. This is especially true if you payout commissions quarterly. In this model, reps will typically end up with money-in-hand four months after a deal closes. At that point, the deal is almost forgotten and while the money is welcome, you’ve turned incentive into a reward. The difference?
Incentives get reps to come early to the office and make cold calls. A reward is only good for keeping people happy at the company, which is nice but does not drive engagement. Pay earlier and more frequently and you’ll find that business goals are achieved sooner and more often as well.
Provide the Right Technology
Managers need to leverage technology that keeps goals top of mind and easily accessible. More information like opportunity estimates will only serve to reinforce the behavior your company desires.
If you’re looking at a sales compensation tool, questions to ask are:
- Does it automate my processes?
- How easy is the tool for reps and comp admins to use?
- Will it scale as you add reps to the team?
- Does it eliminate human error?
- Does it provide your reps easy and real-time visibility into their plans?
The important thing to remember is that the sales compensation software you choose cuts out the frustration that keeps your reps from their prize. Without a streamlined sales comp process, your sales engine will never run at full power.
Key Takeaway aka If You Only Do One Thing, Do This
To bring this full circle, the most important action you can take when aligning sales rep behavior with company goals is agreeing on what you are trying to achieve. Gather all the leadership in the room and ask what problem are you trying to solve? You’ll likely get many different answers (and disagreements!). The good news though is that incentive plans, when properly managed, can allow for flexibility in achieving goals. So in closing, start with your goals, measure, tune, and make way for success.
Today’s post is by guest author, Erik Charles, VP of Product Marketing at Xactly Corporation, a leading provider of enterprise-class, cloud-based, incentive compensation for employee and sales performance management.