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Company leaders and business owners are often worried about overpaying sales reps. This is especially true for the CEO’s who didn’t ascend to their leadership position through the sales ranks and who are not overly sensitive to how sales compensation is earned. The concern is legitimate if one were to look simply at the outgoing commission cheques on some sales teams, but chopping sales compensation based on number crunching is risky business since it enhances the possibility that sales morale will be affected and sales output will be disrupted. A bigger picture view on sales investment versus return is always more prudent, but there are also several ways for employers to approach sales compensation to ensure that sales reps are paid fairly for their contributions but not overpaid.
If a company’s sales reps can afford to drive Porsches, then the company’s leaders should be ecstatic…if the sales comp plans have been set up properly
Attracting the best sales talent in the business will require that an employer offers not only great career opportunities but also market or better compensation to its sales team. However, there are several important ways to mitigate overpaying sales reps.
1. Don’t employ reps who can’t sell – The notion of sales people who can’t sell sounds silly, but there are lot of them and many companies employ them. One of the key ways to ensure the return on your sales team far outweighs the investment is to employ people who actually meet or exceed sales targets. This is not the case on many sales teams where reps that consistently under perform and are effectively paid a salary for attendance rather than performance. Under-performing sales staff are expensive on many levels including lost opportunity, management time, damage to company reputation – they need to be replaced with sales professionals who can and will contribute to company success.
2. Tie compensation to the right results – If the sales people are earning high commissions, it should be because they delivered on their goals which in turn should be explicitly tied to overall sales, profit and company goals. Then if the sales reps are happily cashing their commission checks, the company has also enjoyed strong results and the sales compensation will have a positive ROI.
3. High rewards for high performance – Top performing sales people should receive (and will expect to receive) superior compensation for their superior results. Compensating them in-line with their expectations can often be challenging, but since profits are often not linear as revenues and sales increase, the value of an high producing sales person cannot be understated. To ensure the top sales reps are highly motivated by compensation plans that don’t create problems for the finance department, employers can leverage accelerator mechanisms whereby the sales rep earns increasingly higher commissions on incremental sales above certain thresholds.
4. Put in Place Reasonable Parameters – We are not talking mechanisms that cap commissions here – these don’t help a company become an employer of choice and attract top sales talent – we are talking about managing the risk that reps will take advantage of their compensation plan by manipulating the time timing of contracts or chasing windfall deals. These are easily managed if the compensation plans include clauses that allow the sales manager to review unusually large deals or quarterly numbers that weren’t entirely a result of the sales reps efforts and adjust the compensation to a rate that is fair for both the company and the rep – but tread carefully here – the rep will feel entitled to earn full commissions on the deals they have closed and you never want to lose a top seller.
To your success!
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Eliot Burdett
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
Latest posts by Eliot Burdett (see all)
- 20 Of Our Favorite Books About Sales Management and Sales Leadership – October 20, 2023
- How To Make Progress On Your Sales Goal Without A Sales Leader – September 15, 2021
- Augment Your Recruiting Strategy During “The Great Resignation” – July 26, 2021
Management consultants Mark Stein and Lilith Christiansen, studied the hiring practices and staff retention rates at Fortune 500 companies and authored the book, Successful Onboarding, in which some startling observations were made about hiring:
With busy schedules and many competing priorities, 90 days passes in the blink of an eye for a sales manager. It is easy to forget to pay attention to how a new sales hire is doing – especially if the rep seems to be doing well – but after making a large investment in recruiting a great sales person, it is important to maximize the chances that they will be successful. No period has a bigger impact on sales performance than the first 90 days which is a critical period in setting up a new sales hire to succeed. A structured on-boarding program contributes to ensuring that a new member of the sales team is not only successful, but productive as quickly as possible.
Peak Sales Recruiting is often asked by customers to provide input on sales job descriptions. One of the most important roles on a sales team is the Account Executive, which across various companies and sectors is known by other names such as AE, Account Exec, Sales Hunter, or New Business Development Manager.
they aren’t the ones doing the talking.
Building strong, stable and reliable sales teams is critical to sales performance, certainly in the long term. Sales rep turnover affects sales production, team morale, customer loyalty and ultimately, the bottom line, so it is incumbent on executive leadership to reduce or avoid unwanted turnover in the sales force. Here are 5 ways to reduce turnover in your sales department.