Secrets to Successful Sales Compensation

Alignment, Balance and Customer-Focus

Sales practices remained largely unchanged from the Industrial Revolution to the early 1970s. Based almost entirely on commission, salespeople had little loyalty towards their organizations, and the organizations had little concern for the customer. According to the authors of "A Brief History of the Sales Environment," "As long as the proper allotments of products were being shipped and the sales representatives were meeting pre-determined quotas, firms generally took very little notice of what consumers wanted."

Of course, now we know better. As the authors note, "It has since become imperative in the modern sales environment to gain the trust of prospects and customers by delivering on the expectations set by the sales representative" in the mind of the customer.

The rise of an experience-focused economy spurred the realignment of sales from an internally-focused structure to one that supports the customer experience. A modern sales organization must focus on the customer and motivate the salesperson. Aligning sales structure and compensation to create behaviors seems more daunting than other sales effectiveness strategies, such as training, but potentially has greater impact supporting customer experience while increasing sales.

Below are three hallmarks of a properly aligned sales and compensation structure. How does yours stack up?

"Top students will do fine in a course in which the entire grade is determined by a final exam, but lower-performing students need frequent quizzes and tests …[T]he same general rule applies to sales compensation."

1) Motivating salespeople to do more than just sell
Building the sales team of outbound marketing startup HubSpot taught Mark Roberge a thing or two about compensation models. As he tells it in his article, "The Right Way to Use Compensation," "one of the biggest lessons I've learned involves the power of a compensation plan to motivate salespeople not only to sell more but to act in ways that support a … business model and overall strategy." Using sales structure and compensation as a tool to reinforce strategy involves tailoring your system to your organization. If there were one perfect compensation model, everyone would use it. Rarberge believes "The ideal plan is contextual tailored to both the type of business and the stage of growth the company is in."

At Baker Tilly we advocate a sales structure and compensation model that aligns with the customer and how they want to buy instead of with your product category or geography. What would that look like at your enterprise? We'll map it out for you and help you implement the new structure without interrupting your sales cycle.

2) Keeping it simple, sometimes
Overly complicated compensation structures divert reps' attention from making the sale to tracking their commission. As Roberge notes, "salespeople should not need a spreadsheet to calculate their earnings." Increased complexity also invites the risk of reps gaming the system.

But a one-size fits-all solution fails to accommodate the inherent differences within your team. Different people respond to different motivations. Doug Chung, an expert on the research into the efficacy of various forms of sales compensation, recommends a system that's not too complicated, yet still contains multiple components. As he explains in his article "How to Really Motivate Salespeople":

Some people compare the way people compensate a sales force to the way teachers motivate students: Top students will do fine in a course in which the entire grade is determined by a final exam, but lower-performing students need frequent quizzes and tests during the semester to motivate them to keep up. Our study showed that the same general rule applies to sales compensation.

3) Moving the middle
While many compensation structures focus on motivating the top performers, there can be more benefit to the organization as a whole in nudging the middle of the bell curve up a notch. As we reveal in the whitepaper "Win the Sales Performance Game," based on a recent sales executive council study, "Shifting the Performance Curve," a 5% performance gain from the middle 60% yields over 70% more revenue than a 5% shift in the top 20%.

So, to apply the classroom analogy from above, while an annual quota and bonus may be enough to keep the highest performers on track, lower performers may need quarterly benchmarks to stay motivated.

One piece of the puzzle
Aligning sale structure and compensation to your organization's strategy and your customers' buying habits is just one step in the quest for sales effectiveness. Baker Tilly can help your organization shift from a rigid, mechanical selling structure to one that is more adaptable and customer-centric. Get the most out of your sales team. Contact Baker Tilly today to get started.