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What Your CEO Needs to Know About Sales Compensation


Posted by Parker, Collette at Monday, 01/28/2013 10:24 am
 
  • Currently 3.1/5 Stars.
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3.1 from 33 votes
 
 
Our new book is out! Read an excerpt below and let us know what you think!

The office lights flicker on at 7:00 Monday morning. The early risers arrive and the staff trickles in. The CEO, vice president of sales, CMO, and vice president of human resources sip their first cups of coffee, bleary-eyed from Sunday evening’s conference calls. The office chatter starts. In an hour the phones will begin to ring. A few miles away, manufacturing has been busy at the line for a couple of hours by now.

Despite the bustling activity, it will all come to a halt if the next sale isn’t made. “Sales” is the top line on nearly every income statement. Without it, the funding runs out, the stock doesn’t trade, the lights no longer burn, and the office chatter falls silent.

At the root of sales is a team of tenacious souls squeezed in middle seats without upgrades, walking the hallways of major corporations, making outbound calls to semi-qualified prospects, pacing customer reception areas waiting for a chance to have that critical conversation about the customer’s needs, and generally wearing out the soles of their Cole Haans. Each year on average, they experience eight to ten times more rejection than acceptance from their prospective customers. Yet they persevere – most with continued optimism – in pursuit of the close, the add-on sale, the contract renewal. Most of them are driven by a quest for three things: personal accomplishment, recognition, and compensation … sales compensation … commission … bonus … the deal that makes their year and the company’s year.

The sales compensation plan is one of the most significant drivers of performance in the sales organization and represents one of the single largest expenses a company will incur, commonly tens or hundreds of millions of dollars. It’s a thin but vital long distance line that keeps the daily connection between corporate growth and the rep on the street. It guides and motivates the actions of the sales organization more than any other single factor. It trumps leadership messages, sales strategies, sales management, and sales training. If there is a hard wire between the customer’s office and the corner office, sales compensation is it.
But if the plan’s message isn’t clear or to their liking, sales reps will interpret the plan in their own financial interest. As a corporate leader, you’ll get what you measure and what you pay for – and it may not always be what you expect.

While its impact can be direct, it’s a fine blend of art and science that has long been a point of conflict within companies. Everyone has an opinion about sales compensation and everyone is an expert, yet few agree on the best approach to drive performance toward the company’s objectives. Sales, sales operations, human resources, and finance regularly engage in battles over questions like:

•       Does the plan represent our business objectives?
•       Are our highest paid sales people actually our top performers?
•       Is the plan too expensive?
•       Can we better motivate our organization to pursue the sales strategy?
•       How can we promote more of a performance-oriented sales culture?
•       Can we make the plan simpler to understand?
•       Can we make the plan easier to administer?
•       Are sales quotas penalizing our best performers?
•       How can we set quotas that better represent the sales potential in our markets?

Too often these battles lead to sales compensation programs that are compromises between parties, ultimately leading to underperformance in the business. Above the fray, senior executives look on, often asking only the most general questions. Many of these senior executives, concerned about the next quarter and the remainder of the year, miss opportunities to use sales compensation as tool to drive growth.
What Your CEO Needs to Know About Sales Compensation is not a technical guide for designing a sales compensation plan. This is a book that tells the stories of how senior leaders in a company can understand the connection between their goals and sales performance to leverage sales compensation as a driver of real growth in their organizations. We’ll focus on the top challenges in companies today and offer logical leadership approaches for dealing with each of these issues.

What Your CEO Needs to Know About Sales Compensation, written by Mark Donnolo, managing partner of SalesGlobe, is available now on Amazon.com.


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