Your Sales Comp Plan Stinks (And What To Do About It)

As you read this, some of your best inside and outside sales people are either thinking about leaving or are being actively poached by your competitors. Why? It’s a new year and organizations are rolling out sales comp plans that are often underwhelming to their sales staff.

Think your staff is immune to compensation frustration? Mark Donnolo, managing partner of SalesGlobe, may have said it best: “It’s rare that sales compensation plans are presented to cheering crowds of salespeople, vibrating with excitement about their new incentives and performance measures. That’s probably never happened.”

Turns out, sales staff turnover is a common problem. CSO Insights conducted a survey of sales organizations which showed voluntary turnover is 10.3% and involuntary turnover is 12.1% – which puts total sales turnover at nearly 25%.

So what really makes the difference in sales comp plans? Is it more exotic vacations? Bigger bonuses? Not necessarily.

WorldatWork argues, “your reps will need a combination of extrinsic and intrinsic motivation to be successful” and recommends three key steps when designing a compensation plan that actually motivates your sales people.

  1. Identify your strategy. Determine your goals and makes sure your compensation plan aligns with those goals.
  2. Understand the value proposition of your sales force. “Many people assume that salespeople value money above all else, but they may also value autonomy, recognition, or other reward
  3. Link the strategy to your salesforce culture through your compensation plan.

In 2012, Aberdeen surveyed more than 300 sales organizations to understand how best-in-class organizations motivate their sales staff. Recognition for a “job well done” scored higher than any other non-cash incentives, including competitions, learning & development, and team-based financial compensation. Further, Aberdeen found that best-in-class companies are more likely to indicate that internal recognition for positive performance results is a vital motivator for sales success.

The report reads: “acknowledging the holistic need of salespeople is both a politically correct 21st-century necessity, as well as an approach with proven return on investment.”

Companies with formal internal sales recognition programs were also found to perform better in attaining quotas and renewing customers.

What about sales contests? How do you design them for maximum motivation and performance? Research shows that it’s better to grow the winners’ circle than design a contest with a winner-take-all prize. “Increasing the number of prizes in a contest increases the chances that a laggard or a core performer will win a prize in place of a star, which motivates stars to work harder,” writes Thomas Steenburgh and Michael Ahearne for Harvard Business Review. It’s a win-win for every level of salesperson and the company.

As for bonuses, don’t just stick to once a year. The same Harvard Business Review piece cites research that shows quarterly bonuses are effective at motivating the low-performing groups, including new hires and more complacent sales people. One company that sells office goods removed quarterly bonuses (but kept the annual bonus) and found that it decreased overall performance by 10%.

The takeaway? All the tactics discussed here — positive reinforcement, sales contests, and bonuses — can be integrated into a social recognition program with an internal newsfeed that motivates all of your sales people to win deals. Just remember that your sales people are human, too, and crave recognition and appreciation beyond the basic comp plan.

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