How compensation links to a sales growth strategy
Why focus on improving sales compensation?
Many people who ask that question are really wondering if there is a better way to motivate sales people through compensation. If you want to make sales compensation a critical part of your sales growth strategy, you will find tremendous value in this site.
You can attract & retain top sales talent
Like most managers, I felt like compensation was a no-win situation because strong sales people wanted big bucks, which we did not have. With some creative math that was aligned with the budget I was able to attract top sales talent & reduce my sales costs.
What perspective does SGS have in sales compensation?
We spent our share of time in the sales trenches, managing sales, sitting on boards and owning companies. We understand that a poorly designed sales compensation plan will limit sales growth. Since 1997, we have been providing compensation services to clients focused on sales growth. If you are struggling with sales compensation SGS can help.
Process-Centric: All the pieces fit together in one strong process
SGS specializes in sales management process
Sales compensation is a key sales management process and is one of the least understood and properly executed components. We can coach you through by analyzing the data, setting company requirements and creating healthy sales culture.
SGS can assist in the design and roll-out of your new program
There are many options to consider when rolling out a compensation plan. We will walk you though the pros and cons of different models, test the options and assist in the strategy to the roll-out the new program.
Key goals of a good sales compensation plan include:
- Alignment of company & sales goals
- Meet budget requirements
- Attract & Retain high performing staff
- Motivate sales performance
- Incentivize positive sales behavior
- Penalize poor performance
With a strong compensation process
you will have good data, projections, input and goals to provide
you with the foundation of a successful plan.
Data-Centric: Start by analyzing historical data and sales goal
Understanding the numbers
A company needs to clearly understand the costs and benefits
of all revenue generation activities. Then they need to set a
budget to accomplish their goals.
Define company goals
For compensation purposes, limit your focus only on things that are important to the short and/or long term health of your revenue and profits. Examples include:
Margin goals – Revenue goals – Product mix goals – Market goals – Customer goals.
Collect and analyze historical sales data
It is important to take a hard and objective look at past sales performance by company, region, sales person and client. Look for trends, gaps, positive and negative indicators – this data will be used to set goals and plan design. Examples include: Revenue, margin, sales growth, total compensation
and # of accounts. Present the data as both a number and
a percent.
Define compensation plan goals
Typically this is much harder than it looks as there are many
different opinions and few creative solutions – have your facts
well organized first.
MORECompany-Centric: Determine unique requirements and needs
What are the responsibilities of your sales professionals?
The easiest way to explain why this is important is to show you
a sampling of the questions that need to be considered
when designing a high impact compensation plan:
- Is your staff focused on new business development or account management?
- Are you a price leader or a value player?
- Do you provide leads or is that part of the sales role?
- Is sales support provided or not?
- Are you a market leader or market innovator?
- Is there a lot or little marketing support?
- Are there heavy travel requirements?
- Is it an inside or outside position?
- Is it a highly competitive market or sole-source?
- Are you required to have professional contacts?
- Do they need specific technical skills?
- Do you have strong R&D with unique benefits or are you more commoditized?
- Are they selling to C-level executives, directors, or technical end users?
Your answers affect your compensation design.
The above list is a partial one. But the answers to these questions define the
type of sales skills and effort required for your team to win new accounts. When more effort and
skills are required, different compensation structures need to be considered.
Sales-Centric: A good design understand the value of the sales role
Sales-centric appreciation
At the core, compensation design is the value management places on the sales role. Consider the unique job requirements and DNA needed. They live and thrive in a world where the word “no” is the most common word spoken. Theirs is a world of gatekeepers, objections, waffling, and worse. For a weak sales person, no consequence for under-performing is as fearsome as picking up the phone or selling to prospects fundamentally opposed to parting with their money.
Consider the value of a GOOD sales person
Note, I specifically stated GOOD not average. GOOD sales people gain market share, grow revenue, have higher margins, retain and grow current customer loyalty and increase the value of your company.
Consider the different roles in sales
Paying account managers to manage existing business at the same rate as you pay sales people focused on new business development is a common mistake. There is a significant difference in motivation, skills and income requirements between an account manager and a hunter.
Consider attitude, activities and skills
Unlike other professions the ability to get results vary significantly. It is not uncommon to
see one sales person out-perform the team by 100% to 200% due to their desire to
succeed, high value activities and professional skill set.
Fact: You can balance the income needs and your budget
Done properly, a good design will meet the needs of top sales people and will meet
budget requirements and protect your stars from the competition.
Sales Compensation FAQ
I pay my sales staff well, why aren’t they motivated to sell?
To be clear, there are many reasons why a sales team is not motivated, and compensation is just one of them. If requested, we can take a broad view of your management process before we make any recommendations to change.
In compensation what is the difference between nice, tough and fair?
I’ve been told that I’m too “nice” and too “tough” with salespeople. In reality, though, it has nothing to do with being “nice” or “tough”. It has everything to do with being “fair,” growing the business and raising gross margin, consistently, year after year. If a sales person gets results, they deserve top dollar. If they are order takers, though, they don’t deserve the same rewards. There’s a difference between “equal” and “fair.”
Does a compensation plan that motivates cost more?
Your rewards will shift towards successful sales efforts, which will motivate top performance. However, it will also penalize failure, which will motivate some under-performing sales people leave the company, or start selling.
What are biggest mistakes seen in compensation design?
Generally, there are two categories of mistakes: (1) Plans that motivate but over-pay for performance. This results in a motivated sales team and a weak bottom-line. (2) Plans designed to keep compensation “average” and
control costs. These plans work as designed, with happy
average (and below average) sales people and unsatisfied top
sales people who eventfully leave.
Sales Compensation Pitfalls
Plans designed for “average” performance
Management often benchmarks what an average sales person should earn and designs
a plan around that average. The problem is, you attract and retain
average (or below average) sales people.
Negligible consequences for under-performance
When plans that have a high base and low commission percentage there is very little penalty for performing at 80% of plan and little incentive to do the extra work to achieve 120% of plan.
Weak ties to company strategies and goals
Since not every sale has equal value to the company or requires equal sales effort, a fair compensation should reward more valuable sales, particularly when you’re trying to enter new markets, acquire new clients, raise margins or introduce new products. Unfortunately, few plans reward proportionately for high value activities.
Complicated compensation programs
With sales compensation plans, simpler is better. What good is a plan if it’s so complicated that no one understands it or is motivated by it?
Paying on net revenue, not gross margin
One of the biggest mistakes that I see in compensation design is a plan based on net sales rather than gross margin. To protect risk to their margins, management either compensates based on a worst-case scenario or, more frequently, offer a plan with so many rules and exceptions that the sales team is confused and unmotivated.
MORESales-Centric Compensation Offerings
Will an investment in a sales centric content professional help improve sales?
Each company situation is unique, but the following often motivate companies to pursue a Sales-Centric Compensation strategy:
- If you have few sales people far exceeding their sales plan
- If you feel that your average performers are over-paid
- If you are looking for ways to reward growth without breaking the bank
- If you need a fresh perspective on driving desired behaviors through compensation
Flexibility to meet a range of sales incentive pay and budget needs
We understand that no two companies are alike. Because of this, our programs are designed to be flexible while still providing a basic outline of services that will help you determine what you need and what it might cost. While we highly encourage you to schedule a meeting to review your needs prior to selecting a solution, the information here will get you started in the right direction.
To learn more about our Sales-Centric Compensation programs and services, just click on the links to the right.
Initial consultation
A thorough understanding of a client’s needs is critical to developing a high-impact compensation program. In some cases, we might discover that there isn’t a fit for our services. In most other cases, we find that we can help increase results through Sales-Centric Compensation. Regardless of the outcome, an initial consultation is critical for an efficient process.
Agenda
- Discuss compensation concerns
- Discuss details of your current program
- Discuss goals in updating your program
- Discuss high-level compensation options
- Determine which program best fits your needs
Price: No charge
Compensation Review
Is your organization already close to an optimized compensation plan? Whether you want an objective third party review or just some additional ideas, the Compensation Review session might be a fit. It’s designed for companies with simpler needs or with strong internal resources to execute, allowing them to take the ball and run.
Agenda
- Two-hour review
- Discuss compensation concerns
- Discuss details of your current program
- Discuss goals in updating your program
- Discuss high-level options
- Provide summary report with 2-3 best options
- Provide automated compensation testing tool
- Provide 85 page reference guide
Price: $1,250
Compensation Coaching
Great teams have great coaches – strong processes are the result of strong coaching, too. Our Compensation Coaching session is designed for companies that want a detailed review of their current compensation program but have internal resources to execute.
Deliverables
- Meet with key management staff
- Detail compensation concerns
- Detail goals for an updated program
- Audit current compensation data
- Propose compensation options
- Rough draft of compensation options
- Provide automated compensation testing tool
- Provide 85 page reference guide
- Discuss implementations options
- E-mail and phone support
Investment: $2,250
Compensation Design
Sometimes, it’s best to rebuild a compensation plan from scratch. The Compensation Design option is designed for companies who want a detailed review, fully developed, tested plan and have the internal resources to execute.
Deliverables
- Meet with key management staff
- Detail compensation concerns
- Detail goals for an updated program
- Audit current compensation data
- Propose compensation options
- Rough draft of compensation program
- Develop and refine compensation program
- Test effect of change for current staff
- Final refinement and delivery of finished program
- Detail implementations options
- Automated compensation testing tool
- 85 page reference guide
- E-mail and phone support
Investment: $4,995
Comprehensive Compensation Package
In many cases, the most complex part of changing a compensation plan isn’t the actual plan development, but the plan deployment. The Comprehensive Compensation package is designed for companies who want a detailed review, fully developed, tested plan, but see the change as major strategy deployment and potentially complex.
Deliverables
- Meet with key management staff
- Detail compensation concerns
- Detail goals for an updated program
- Audit current compensation data
- Propose compensation options
- Rough draft of compensation program
- Develop compensation program
- Test compensation staff effects program
- Refine and deliver finished program
- Detail implementations options
- Prepare individualized plan for all staff
- Automated compensation testing tool
- 85 page reference guide
- E-mail, phone and in-person support
Investment: $9,500
General Compensation Program Details
Fees are due:
50% at outset of project
50% upon completion
Guarantee
If client is not satisfied with final result, they will not be required to pay final 50%. There will be no refund for first 50%.
Upgrading Services
If client wants to upgrade for more service, initial fees will be deducted from the second service.
Client and SGS expectations
There is a defined set of deliverables for each package. This is offered to meet specific business needs & budgets. It is expected that each party respect those details
Is an investment in an outside compensation professional right for you?
Each company situation nique, but the following benefits are common with most that move to Sales-Centric Compensation:
- If you are over-paying for results, expect a savings of 5 to 10% on compensation costs
- If your plan does not motivate, expect a 5-10% increase in net sales
- If your plan does not attract top candidates, expect a 10-15% increase in sales
Programs & Pricing
Initial Consultation
Compensation Review
Compensation Coaching
Compensation Design
Comprehensive Compensation Package
General Compensation Program Details
Return to Overview
Free resources to assist in your sales compensation efforts
Looking for additional resources on sales compensation design?
Over the years, SGS has developed a wealth of resources – you’re welcome to take advantage of them. We encourage you to share with others that might benefit from the material, so feel free to pass them along.
Resources offered today
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Sales compensation e-book – 100+ pages insight to our process |
Our assessment to see how your compensation process compares |
Monthly Management e-letter filled with sales management tips |
LinkedIn? Facebook? Blogs?
Regardless of your social media method of choice, we have you covered. If you’re not quite ready to commit, feel free to check out all of our web content at any time. With over 2,000 pages of content, there will be something there for you.
MOREIs it time to improve your sales team’s ability to win new accounts?
SGS’s mission is assisting clients grow sales
If the time to sales growth was speedy and predictable, every company would be successful. SGS offers a wide range of services including: C–level strategic consulting, sales management coaching, sales skill development and recruiting services–all focused on helping our clients win new accounts and gain market share.
20-to-1 ROI Commitment
SGS clearly defines the goals, requirements and actions required to achieve over a 20-to-1 ROI on all coaching or training engagements. If at any time that result can’t be achieved, we part friends.
Performance Guarantee
SGS guarantees that all coaching or training engagement meetings will provide actionable recommendations that lead to sales or bottom-line growth. Or that meeting is FREE.
Now is the time to start a sales growth effort.
Take advantage of our FREE Right Fit Meeting and consultation. Discuss solutions, options & determine fit.
Is SGS right for your needs?
Clarity on who we serve is why we can guarantee results
We typically deliver ROI in excess of 20 to 1. However not every company is a fit for the services we provide. Our ability to grow is tied to the success of each new client project. This is why we start all engagements with a Right Fit Meeting, to determine whether or not there’s a match.
Who is an ideal client for SGS services?
- One focused on winning new accounts
- Committed to gaining market share
- Values predictable processes & insightful data
- Wants experience & proven success
- See SGS client testimonials
What types of companies work with SGS?
- Mid-sized companies or divisions
- Annual revenues of $20 to $300 million
- Managing a complex sales process
- Selling products or services B to B
- See SGS client list
Why clients partner with SGS?
- Recognized expert for sales growth
- 15 years of documented client successes
- Data driven improvement processes
- Customized sales growth solutions off
- See SGS case studies
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