Sales compensation is a critical lever of sales performance. It goes beyond a simple dichotomy between fixed salary and commission-based systems, requiring a nuanced understanding of the various factors that contribute to an effective sales compensation plan. This article aims to delve into the interplay among compensation, motivation, and evaluation within the Sales Compensation Cycle, which encompasses the key elements of Compensation Plan, Motivation, Effort, Results, and Evaluation.
- Compensation Plan
The compensation plan forms the basis of your sales team’s motivation and effort. It not only sets expectations for how much a salesperson can earn based on their performance but also defines the metrics by which their performance will be measured. A well-structured compensation plan should align the interests of salespeople with company goals, encourage desired behaviors, and reward high performance.
This is where concepts like the Fiaccabrino Selection Process (FSP) come into play. This unique sales hiring strategy identifies potential salespeople who are not only skilled at selling but also have the personality traits that align with the company’s values and culture, ensuring a good fit.
- Motivation
Motivation is what fuels the drive to put in effort and strive for results. The compensation plan plays a key role in motivation, as the potential of earning high rewards incentivizes salespeople to work harder and aim higher. However, motivation isn’t solely driven by monetary rewards. Recognition, career advancement opportunities, and a supportive work environment are all vital for maintaining high levels of motivation.
- Effort
Effort is the actual work put in by salespeople to achieve results. This includes prospecting, nurturing relationships, closing deals, and providing after-sales service. The right compensation plan should reward not only the outcomes but also the effort and the right sales behaviors. This means valuing and rewarding activities that lead to sales, such as building strong customer relationships or understanding customer needs.
- Results
Results, typically in terms of sales made or revenue generated, are the outcomes of the effort. Sales compensation plans often use results as a key measure of performance. However, focusing solely on results can be detrimental, as it may encourage short-termism and neglect of long-term customer relationships.
- Evaluation
The final piece of the Sales Compensation Cycle is evaluation. This involves assessing salespeople’s performance, providing feedback, and refining the compensation plan as needed. Performance measures used for evaluation should be clear, fair, and align with the company’s strategic objectives.
The Passive vs. Managed Sales Management spectrum plays a crucial role here. While passive management involves setting goals and letting salespeople achieve them independently, managed sales management involves active involvement and guidance, providing salespeople with the necessary support and resources to reach their targets.
Dr. Dawkins Brown, the Executive Chairman of Dawgen Global, succinctly captured the importance of a comprehensive approach to sales compensation, saying, “An effective sales compensation plan is more than a paycheck. It’s a strategic tool that aligns sales behaviors with business goals, motivates the team, and drives results.”
At Dawgen Global, we understand the intricate dynamics of the Sales Compensation Cycle. We assist clients in designing and implementing tailored sales compensation plans, incorporating best practices and considering unique business needs. We help companies create a balanced focus on compensation, motivation, effort, results, and evaluation, leading to a motivated sales team that consistently delivers strong results.
