How are you compensating your sales force?

In today’s booming economy, it is increasingly difficult to find sales talent. Low unemployment makes finding hungry sales professionals more difficult.

A key factor to any company’s success is how well they compensate their sales force. Nothing happens within a company until somebody sells something. A well-compensated sales team will be motivated and reduce the chances of your top people leaving.

A primary question for any sales leadership is “how do we compensate our sales force?” If everyone on the sales team were equal, it would be simple, but they are not. The 80/20 Rules fits most sales organizations, which means that 20% of the sales team generates 80% of the sales.

These sales professionals work harder, work smarter, and use every resource at their disposal to sell the customer. The 80% of the sales team doing 20% of the total business, believe their compensation should mirror the top 20% of the sales force that is actually getting stuff done.

In reality, it should be an easy call; paying each sales person for their performance, but ego’s and longevity with the company put up road blocks. Too many of the 80% are coasting along and just do the minimum. One of my business foundations is – “Don’t let the minimum, be your maximum.”  The top 20% of overachievers get it and most likely, the 80% will never get it.

The 3 ways to compensate your people

When looking at your sales staff compensation model, you have basically three options: straight salary, straight commission, or a combination of commission and strategy.  I’ve tried them all and in the right situation, any of the three will work. You just have to find the one that works best for your company.

Real Estate agents work 100% on commissions. My sister is in real estate in Nashville, TN. She may be the hardest working agent I know. She works 70-80 hours a week, and deserves all the compensation she receives.

My preferred method of compensation is #3 … the combination of salary and commission.

Ideally for me, I pay a low salary and weigh more on the commissions. The really aggressive sales people will get after it and maximize the earning opportunity. The average sales people will complain about the lower salary, but then won’t do the hard work it takes to realize their earning potential. These people are always looking for the perfect sales job and will usually job hop in search of the mythical easy sales job.

Top performers expect to be highly compensated or they will find another opportunity. It is critical for the company to know who their top sales people are and compensate them fairly, plus offer any additional perks that come along (football tickets, opera tickets, etc). The extra perks act as additional incentives for your “go getters” to work even harder.

Compensation not all about money

Money alone is not sufficient to keep all your sales team happy. A good compensation plan must meet the needs of the sales team financially, but personal recognition and encouragement are like adding icing on the cake.

All sales people want recognition in front of their peers and top management. Another perk for high achievers is sending your top people to training seminars and advanced training. I had a CFO at one of my companies complaining about the high costs of training. He said, “What if we spend money training these people and they leave us?” My comment back was, “What if we don’t train them and they stay?”  I am a firm believer in continuous learning for top performance.

There is no “one size fits all” sales compensation plan. Every company has different circumstances and must blend their compensation plan to fit their company and their industry but, it is critical to have the right plan for your company. And, if you get it right, it will increase morale and reduce turnover.

Sales compensation programs are critical for a company to remain competitive in the marketplace and will secure the long-term success of the company.