Sales Compensation with Consequences

By Gil Cargill on February 18

The Missing Link for Predictable Performance

Countless hours, dollars and efforts have been put into creating and recreating sales compensation plans.  Management frequently says things like, “If I worked for me, I’d be making a ton of money!”

We mistakenly feel that creating a comp plan that rewards sales success is the best way to produce a behavior change.

Look at the number of spiffs, dollar-oriented contests, bonuses, et cetera, all of which hang the dollar carrot in front of the sales team.  But, here’s the truth: You can’t make an adult want to earn more money than they want to earn.

All the spiffs, bonuses, commission increases, et cetera do not – and, if you’ve ever tried it, you know this is the truth – elicit a permanent, measurable change in the sales team’s performance.

You don’t get more calls; you don’t get more proposals, quotes and/or demonstrations.

But, you do get to pay more money for activities which, by and large, would have occurred anyhow.

Here’s the flaw in this reward-based thinking: We humans change our behavior much more rapidly and permanently, when we are aware of negative consequences that will accrue to us if we don’t change our behavior.

For instance, I’m willing to bet that the car you drove this morning is capable of exceeding the posted speed limits by a factor of 2x, perhaps 3x.  But, I’m also willing to bet that the vast majority of us keep our speedometer needle pretty close to the speed limit.  Why?  That’s because we are all aware of the negative, painful and costly consequences of getting caught speeding.

If your comp plan doesn’t have a downside in it for the sales team, for noncompliance issues, then more often than not you are overpaying for underperformance.

  • How many sales executives have ranted and raved in front of their sales team to get them to use the CRM system?
  • How many times have you told a salesperson that he/she must turn in a report or a document on time?

If you’re a manager that is constantly telling your people that you want them to do something that’s legal, moral, ethical and, candidly, quite fair and doable, yet and still they aren’t complying, then you are being “smiled to death”.

In my forty years of coaching and consulting, I’ve seen hundreds of situations where the CEO said things like, “I want everyone to make two more sales calls per week,” but it never happened.  Or, “We have to work harder”; again, no change.  Or, the old standby cliché, “We have to work smarter.”  Once again, no permanent change.

Sales Compensation with ConsequencesBut, the purpose of this posting is to make you aware that, in most states (I’m not an attorney, so please check with local authorities before you do this), it’s quite legal to create a comp plan that says, if a salesperson doesn’t do what you want them to do, then their base salary and/or their commission rate is cut.

In other words, implementing a negative consequence for noncompliance will get behavior change and compliance much more rapidly than any number of rewards or incentives.

Now, I know a lot of people will find this post controversial, but how many people work for you in non-sales positions that are able to dictate how they’ll work, when they’ll work, and what aspects of the total job they’re willing to do and which aspects will they ignore?

Again, I think I have a pretty safe bet if I put my money on the side that says very few, if any, of your non-sales employees are capable of ignoring management wishes and retain full pay and their full employment.

Take a look at your comp plan and whether or not it’s giving you the behavior that you want.  Or are you, as with many sales executives, accommodating bad behavior, malicious compliance and/or just outright passive-aggressive activities?  And, worse, you’re paying for it.

So, if you have a sales team that isn’t doing what you want them to do and if what you want them to do is strategically and tactically valuable, then consider a comp plan that produces negative pay consequences for people who don’t comply.

If you’d like to explore this concept in depth, feel free to send me an email to gil@gilcargill.com and we will get together by phone.

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