Tis the Season for New Comp Plans
Business owners and salespeople share a common enemy. They hate their sales comp plans.
As we approach another new calendar year, companies should be looking to tweak, adjust, or completely overhaul their compensation. Frantic owners and managers are looking for ideas, insights, and best practices so they can magically transform their plans into something more motivational, equitable, and profitable. This makes salespeople nervous.
But why does everyone hate their plan so much?
Most comp plans are relics from a different era, when sales were different and solutions were different. They were originally created in product-centric times, and they haven’t evolved to properly incent for services, cloud solutions, and other XaaS offers.
Owners end up overpaying for the wrong things and underpaying for what really matters. Owners gladly pay for productivity, but hate paying big money when salespeople:
- Take orders
- Ignore their embedded base
- Don’t sell anything at all
What owners really want are:
- New logos
- Managed Service contracts
- Juicy MRC checks
Plans Lack “Checks Appeal”
It’s expensive to pay big commissions for sales that drip monthly payments over a number of years. So owners don’t. They prefer to give the rah-rah speech about the wonderful benefits of compounded annual growth of monthly commission checks. This generally doesn’t work. As the saying goes, for salespeople “Tactics is Lunch and Strategy is Dinner”. They can’t and won’t think really long term.
Something to Hate for Everyone
Salespeople hate their plans, too. As we all know, the company across the street pays higher commissions, charges less for service, and provides better leads.
Salespeople spend so little time doing what they love best, dealing with prospects and making sales. They rightly point to all the non-selling work they are required to do. They scream for more administrative support, design support, engineering support, and marketing support.
Of course, these added resources cost money. Increased costs require changes in the compensation plan, which freaks out the salespeople, That’s the conundrum for owners.
Most companies use this three step method to change their comp plans:
- Introduce the idea that comp plans will change
- Stand back in shock as the salespeople go completely insane.
- Postpone changes for another year.
It doesn’t have to be this way. You can have high sales compensation and high profits, but the two areas need to be in alignment.
Practical Ideas to Migrate Comp Plans
The best comp plans are constantly evolving as the business and marketplace change. Minor changes every year provide continuity, yet allow the business to adapt.
- Incent leasing. Wrap your services into leases so you can sell the low monthly payment, yet pay a big commission up front.
- Always “pair” commission increases and decreases. For example, you might increase the incentive for new logos while decreasing the commission for service contract renewals. Smart salespeople will change behavior accordingly.
- Try to implement changes that are simple to understand for salespeople and easy to calculate for the company. Avoid “Obamacare for Sales”.
High profits and high sales compensation are not mutually exclusive. Don’t delay, don’t procrastinate, and don’t kick the can down the road. Owners and salespeople should BOTH earn more money.
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