6 min read
October 15, 2015
Last updated: August 6, 2019
is an accomplished consultant, popular speaker and the acclaimed author of a series of international business bestsellers
What is the biggest sales compensation mistake that companies make?
Biggest mistake is designing sales comp plans independently of the business and marketing plans. Sales comp plan should be one of the last pieces of the marketing plan. Sales comp plan should incentivize sales people to make the plan happen.
Another mistake is to attempt to design the perfect comp plan. If management can get a plan that addresses 90% of the selling issues, that is a good plan.
There has been very little innovation in terms of compensation structure for sales professionals. Usually it's commission, quota, bonuses for exceeding quotas. Do you know of any new compensation models that our readers might want to consider?
Since the beginning of enterprise, the most compelling comp structure is pure “commission.” 100% commission is the comp plan for small business owners; solo practitioners; waiters; cab drivers; consultants; and so on. What is innovative is to not only understand “pay for performance,” but to actually do so. The key is the definition of “commission.” For example, tips are commission. Sales people on 100% commission plans make the most money. Sales people on 100% salary make the least amount of money. Sales forces comprised of 100% commissioned reps require the least amount of training and the least amount of supervision.
Depending on the sales cycle, it is often a good idea to ramp a sales person up to 100% commission with advance payments.
One more thought: Rainmakers, the 5-10% of all salespeople, and the people who make the most money, hate team bonus pools, and any scheme that links their pay to the performance of others.
Sales agents will always be motivated by profit. But what non-monetary incentives do you find effective for improving performance of sales reps?
Recognition. Stock grants or stock options...but awarded individually, based on performance.
Hiring sales agents is a relatively simple and straightforward, but building an effective sales team is not. Can you share some tips and tricks for companies who are about to starting building their sales department from the ground up.
First, get crystal clear definition of why the company needs sales people. Second, define with precision what outcomes the sales person is expected to deliver. Too many companies focus on what the sales people should
do, such as “make five sales calls a day,” instead of on outcomes, such as “generate $10,000 of gross margin a month.” Good sales people want to know what they must accomplish to make a lot of money.
When I interview sales candidates for clients, I make certain every single question the candidate may have is answered in detail. I encourage candidates to keep asking questions so that they know what is expected.
In my view, people hire and fire themselves. Only the candidate knows for certain whether or not they can do the job. I tell that directly to candidates. Thus, if they are offered a job and take it, then they must deliver or they are gone.
What are your favourite free sales tools?
My books. Orchids, because they bloom for weeks/months, and are a constant reminder. Belgium chocolates. Giving tips and advice without expectation of immediate payment.
What resources, books, blogs, podcasts can you recommend to our readers who'd like to learn more about sales team management?
Four of my books were written for sales people and sales managers: “How to Become a Rainmaker
;” “Secrets of Great Rainmakers
;” ”How to Become a Great Boss
;” and “How to Be a Fierce Competitor
.” There is also lots of good, free stuff on our website
Thanks for the interview.