Did you revamp your sales incentive program in 2020? Were commissions part of your 2020 new year resolutions? Do you feel like your sales incentive program should be improved? We asked 4 sales leaders for some recommendations:
- Brandon Bornancin helps over 50K reps fill their sales pipeline
- Mark Boundy helps organizations deliver more value from pricing to strategy
- Richard Harris optimizes sales funnels and solves key operational issues
- Don Peppers is a best-selling business author and sales & marketing expert
Make Commissions Simple But Rewards Big!
According to Brandon Bornancin, you must be willing to pay for results. Sales reps thrive on commissions, so make sure you’re paying big for great results. Don’t cut commissions, don’t get cheap with rewarding your people, and come in with the right compensation model.
Sales companies which cut commissions, or make commissions an impossible calculation, lose in the long run. You have got to make commissions easy, you have to make commissions simple to understand, you have to pay your reps on time, and you have to offer big potential rewards!
Consider keeping the types of rewards you offer to 3 or fewer. If you have too many competing goals driving commissions, your reps will need to figure out how to optimize their sales behavior across several metrics to maximize their payout. And that’s going to be a distraction.
When Sales Commissions Aren’t Paid on Profits, You Get What You Pay For
According to Mark Boundy, the majority of sales organizations have no profit or margin component in their sales compensation plans. The most common excuses are:
- Sales cannot control costs
- Profit is too hard to measure
Mark is championing profit-based incentive programs because they:
- Give sales leaders a seat at the table
- Sales has more control over profitability than any other function within a company
- Align incentives between sales and the rest of the company
- All you need is a “close enough” formula that drives the right behaviors
- Incentivizing lazy selling/discounting attracts the worst kind of customers
Read our post about profit-based commissions – or reach out to Mark!
Keep Commissions Simple and Straightforward
According to Richard Harris, if a rep can’t figure out how much they are going to be paid within 5 seconds, you are doing it wrong. And if your first response to this comment is “Yeah, but Richard, we are a really special snowflake, and we have to do it this way. ” Well, then, you’re still doing it wrong.
If your reps cannot understand their commissions, they are going to be frustrated, become suspicious, or give up. They’re also going to waste considerable time calculating their own commissions or arguing about details.
And if you are still using old-fashioned commission spreadsheets in 2020, you’re making it complicated. Check out this blog post (it explains why they are so evil).
Incentivize Sales To Retain & Grow Relationships
According to Don Peppers, one of the biggest problems with the way most commission structures operate is that they give little incentive to the salesperson to work for the continued retention or growth of a customer relationship. Instead, the compensation is all “upfront”, based on the acquisition process alone.
If a salesperson had an economic stake in a customer’s continued business, beyond the initial sale, then salespeople would do a better job of identifying those customers more likely to remain profitable over the long-term.
For example, you could include incentives which focus on customer retention. You could boost commissions for renewals. Or you could include a commission component which is based on customer interactions or overall satisfaction.
Two of our 4 sales leaders above focused on keeping comp plans simple and easy to understand, while the other two focused on value and connecting payouts to profitability and customer experience. Consider reaching out to them for additional recommendations.
What is your primary goal as you assess your 2020 comp plans? What if there was a way to keep things simple but also include value as a driver of commissions? Finally, if you’d like to automate your commissions and make them more transparent to your reps, we’d love to help!