How Comp Plans Impact Revenue Growth (Part 3)By The Sales Cooke
“I don’t understand why my manager doesn’t do something about the salespeople who don’t give a crap and why I don’t get a raise for carrying this team?“ ~ A real conversation from this past week
Sales compensation can be a tricky issue. Depending upon the selling cycle, the selling process, the product, margins, sell price, etc., there are many ways to compensate salespeople. The bottom line is that your compensation program must:
- Reward the behaviors that you expect of your growth team. (This was discussed in detail in Part 1)
- Be financially advantageous for both parties. (This was discussed in detail in Part 2)
- Be balanced toward who is taking on the most risk. It is this issue of risk that often creates friction and frustration between the professional and the firm.
If the firm is taking on a high amount of risk by paying a large base salary and a commission, there is little room for rewarding anything other than exceptional results. Even then, the cost of getting to those results makes the variable compensation piece a low component of the overall income.
By contrast, a fully-commissioned growth professional is taking on all of the risk. The firm essentially compensates this professional only when they deliver the desired results. Hence, the reward structure for this is all variable and is significantly more rewarding to the growth professional for their assumption of the risk.
It is my belief that unless the selling cycle is exceptionally long (9-18 months) most compensation programs can tilt risk more toward their growth professionals. Many businesses today provide too much fixed compensation to their teams and expect them to hustle for a smaller variable component. If your business desires a growth oriented professional, find those who will take on more risk, educate them, nurture them, and turn them loose. Make them too fat and too comfortable and they will move slowly. It is your choice.
- Provide the education, development, resource and management support necessary to facilitate growth. (This will be discussed in detail in Part 4)
Dave Cooke has recently launched his program the Sustainable Revenue Formula™ (SuRF), which provides businesses a comprehensive formula for effective and sustainable revenue growth. If you are interested in obtaining a copy of the white paper, “Revolutionizing the Future for Today’s Business”, please contact me: email@example.com.