But I will and the question is: Are we working on the Right Problem when we devise comp plans?
I get all sorts of RSS feed on sales compensation, including the latest from www.gotomarketstrategies.com Good content all but I think most miss the major point.
Vision Should Drive Compensation
The major point is what kind of compensation plan is going to lead to the vision of a business? Not which ones are easiest to calculate…or to track…or to manipulate. Which one best leads to the vision.
Since the vision of your business should be somewhat (or totally) focused around “customer problems and your ability to solve them–and what happens to you if you’re really good at that–then it seems comp plans should match up.
Shouldn’t there be a component of this that has to do with Customer Perception of how you solved their pain? Sure, there should. Can you put a dollar and cents # on it? No, not likely for most selling orgs.
A Compensation Solution
But you can offer some type of a component that has the Customer Rating of the sales person’s competency at understanding the problem and assigning resources to solve it.
There are plenty of survey packages that will do the trick, but first you have to change your thinking about compensation.
If you’re a manager/leader/president, float this idea past your people. If they balk, it might be just what they need to fully measure what you expect from them: Great problem solving skills.
Maybe you hold a percent or two back for those sales execs who are masterful at solving problems. And they get extra compensation for it.
The Customer’s Problems Come First–Not Compensation
Caution: Remember, I come from a different position on selling–one where the customer and his/her problems come first. My belief is that if you’re a competent problem finder and solver, the revenue will come. Everyone wins. So why not compensate your sales team on that?
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{ 3 comments… read them below or add one }
Bill,
I dare to be a bit more radical on variable compensation. I think it is simply counterproductive if you take selling from a point of service and contribution to the customer. It is my understanding that this is the approach you promote with the Inner Game.
There are 2 sources that brought me to this radical attitude. For those more inclined to believe in statics and hard facts I would recommend “Hard Facts, Dangerous Half-Truths & Total Nonsense….” by Jeffrey Pfeffer and Robert I. Sutton. If you prefer a behavioral view look into “Sway, the irresistible pull of irrational behavior” by Ori and Rom Brafman
This second source helped me also to understand why the myth that sales people are coin operated can persist.
From my own observation, one of the problems is that people seem to confuse frequently observed practices with best practices.
Christian,
Excellent response. There is no ONE way to do compensation. Hope I didn’t suggest that. I will read your book ideas…always like Pfeffer and Sutton. I was saying that the contribution of value to the client could be ONE of Many components to how people are compensated. What that looks like will vary between companies.
I am for a total overhaul (which it sounds like you agree with) on sales compensation. In so many companies it just doesn’t work.
Bill - good points. I think you’re spot on.
Most sales compensation plans are strictly focused on maximizing revenue and they don’t even do that well. I’d say we’re a ways away from a more “quality-based” compensation approach.
Maybe a good first step before drastically flipping sales compensation on its head is to take a more gradual approach. Take 15% of your compensation out of your “dollars for percentage of plan bucket” and convert it into an MBO. This allows you to drive towards quality.
For instance - on target earnings based on revenue intake are now $40K. You lower that portion of the plan to $34K and add $6 in quality driven MBO’s. It’ll give you a good (yet relatively safe) way to test the waters.
The fact that an overhaul is needed is hopefully broadly acknowledged.