Is your sales compensation plan encouraging a "life of crime"?

Guest Contributorby Dominique Jones | Posted | Total Rewards

Is your sales compensation plan encouraging a \

Well maybe “crime” is a bit of a strong word… but seriously, without realizing it, your sales compensation plan could be encouraging your sales people to engage in a variety of activities that could ultimately hurt your organizational culture.

And potentially impact your customer relationships and your bottom line.

Think about it…

Compensation plans for sales typically include some combination of: base salary, sales commissions and bonuses.

Finding the right mix of these elements is the all important key to driving individual and organizational success. Get it wrong, and you could be inviting all kinds of unsavory characters and activities.

Let’s look at the profiles of a few of these characters.

The small timer

If, for example, your sales compensation plan solely includes, or has too high a base salary component, many argue there’s no incentive for sales people to excel.

What you might be encouraging is complacency on the part of your sales team.

They won’t push to meet or exceed their quotas or targets.

They won’t go out of their way to chase after bigger, more challenging, but potentially more lucrative clients.

And they’re sales strategy won’t align to the vision and values of your organization.

 

The wheeler dealer

Another common sales compensation plan example sees your sales people paid exclusively by commission, or by a small base salary or draw augmented by commissions on all their sales. This model puts the focus on sales, and rewards individual sales people for their efforts.

You might think this is the ideal model, because you’re rewarding the thing you want your sales people to do — sell.

But hold on. Putting too much weight on sales commissions can actually spawn a culture of wheeler dealers who are out to make a sale at any cost. We’ve all met or heard of those sales people who fleece their customers.

Selling features that don’t exist, over-promising or over committing on anything and everything from product capabilities, to delivery dates, to service. They just want to make the deal so they get more money.

They don’t care about the customer experience. They don’t care about the stress experienced by your product development folks, or the headaches caused to your manufacturing, logistics, delivery or support teams.

They’ve accomplished their goals and lined their pockets, so they’re happy.

The kingpin

When your sales compensation plan adds bonuses to the mix, providing financial rewards for achieving or exceeding targets, you encourage sales, but might also be creating kingpins.

A kingpin is one of those top sales people who seem to always close the most deals. They have the biggest clients, the biggest reputation, and win all the awards.

But sometimes they do that at a cost. They skim the best prospects and keep them for themselves, or even poach sales.

They don’t support or collaborate with other sales people. They’re building an empire and being rewarded for it.

So how to you take down this “crime ring”?

Identify the competencies that both underpin your culture and lead to success in sales. Cultivate them in your sales team, and financially reward your sales folks for exemplifying them.

By doing so you make it easier to recruit and attract the kinds of successful sales people you want and need. You also make it easier to shed the shady characters — the ones who can end up harming your business.

So think about it… What makes a successful sales person in your company and in your industry? Do they need integrity, industry knowledge, technical abilities, cultural sensitivity, communication skills?

Study your truly successful (by honest, ethical means) sales people and see what makes them successful. Then cultivate and reward these competencies in your entire sales team.

Focusing on competencies and encouraging ethical behavior is part of a new movement towards values based leadership that’s touched on in this Harvard Business Review article. The author points out how the wrong measures of success can lead us astray, regardless of our role or function in the business.

While the article emphasizes individual responsibility for values and ethics, our organizations and our compensation management programs can also play a part.

If you want to know more about how to implement a successful pay for performance program, or how to identify and cultivate competencies, check out our talent management centers of excellence. You’ll find a whole variety of resources and information to help you understand current best-practices.

Find a Variety of Resources on Talent Management Best Practices


READ NOW
Cover
Cover

Find a Variety of Resources on Talent Management Best Practices


READ NOW



Close [x]

Get our Saba Blog Digest email delivered right to your inbox.

Join over 100,000 of your HR peers: