Radical New Compensation Plan

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Worried BusinessAs many of you know, I’ve been coaching sales organizations for over thirty five years.  One of the common frustrations that business owners and CEO’s share with me regarding their sales force is the lack of motivation.

They typically try to motivate their sales people by offering significant bonuses and or commissions.

Unfortunately, I have come to believe that you can’t make an adult want to make more money than he or she wants’ to earn.  If you agree with that, then offering all of the bonuses in the world (assuming they are being awarded for incremental work) will not change the behavior of a sales team what so ever.

It’s a fact, you can’t make adults want to earn than they want to earn.  Consequently most compensation plans have this common flaw.

They are written based on the assumption that a comp plan will motivate and or change the behavior of a sales person.  I believe that compensation should reward for results, and, (and this is the radical new component of compensation), provide punishment for lack of activity that produces results.

You heard me, I believe that compensation should be a two way street.  The same CEO’s that complain about the motivation of his sales people, Or the fact that their sales people won’t use the CRM system, or they aren’t filling out the forms correctly or they aren’t making enough calls.  You name it there is some activity based complaint that most CEO’s have about their sales team.  And, this is the crazy part, when they are frustrated with the lack of activity they continue to pay the same salary.

Most compensation plans that have a salary component are not in my opinion paying people to show up, not paying them to do some specific task.

  • Take a look at your compensation plan, what specific activities are associated with the salary component of the plan?
  • If you tell your people to make (X) number of sales call per week, and they don’t, what happens to their salary?

More often than not, nothing.  If you’ve invested heavily in a new CRM system and you want your sales people to use it, but they don’t use it what happens to their salary?  Once again, nothing.

You see the real issue is that most compensation plans which have a salary or a guarantee component have no negative consequences for failure to do the work that is required by the company.  No other position in your company can perform, from an activity point of view, so poorly yet get fully compensated for their work.  Now I know this is radical, but I’ve seen it work over and over again.  When your salary is at risk for not doing the task that management requests more often than not the sales person will execute those tasks.

So my suggestion is examine the salary component of your compensation plan.  Then ask yourself this question what happens to my sales team, financially if they don’t execute the activities that I’ve requested them to execute?

If the answer to your question is nothing, then you are, indeed, my friend, you are over paying for under performance.  A salary which will be reduced in the event that non dollar oriented objectives are not achieved, is a salary that has behavioral teeth in it. On the other hand, if there are no negative consequences for negative behavior you will continue to over pay for under performance.

Give this idea a try and feel free to call me at (310) 447-4102.

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