Don’t ruin your commission structure
Sales compensation plans are powerful tools for generating the sales results you want. But, managing them wrong, could be counterproductive. Having too many mistakes in your commission plans will lead to losing valuable sales opportunities. Any error in your sales compensation plans has a huge cost to team motivation and company credibility.
It is crucial to detect in time when your sales compensation plans are going wrong. Look at these signs of commission plan failure, and get the ball rolling to enhance your process and strategy:
Hard to understand
Salespeople need to completely get the strategic objectives of the company and the sales compensation plans that represent them. A complicated compensation plan is a waste of manager’s time and company’s money. When your salespeople are confused, client retention goes down and sales productivity decreases.
A good recommendation to test your sales compensation plans is difficult to understand, ask a sales rep to explain it to you. Analyze the answer and how much time it takes the salesperson to explain. Keep your commission plans simple and every member in your sales department will be happy with what they are to achieve.
Inability to adapt
Data change, organizational needs are not always the same and market changes exist. A company needs to constantly adapt its sales compensation plans to these fluctuations. But, many companies suffer from a lack of adaptability. Therefore, thinking big in the sales department is something that becomes impossible. Consequently, that affects your service and business.
Inability to adapt avoids sales directors from moving aspects of sales compensation plans. Errors delay the response to situations in your commission plans. Therefore, higher adaptability means higher revenue, overpayment elimination and lower administrative costs.
It is good to be ambitious while creating sales compensations plans, but not unrealistic. Before setting goals, make sure to understand your growth potential to the fullest. Then, you can design a compensation plan that helps you get where you want to go. Setting unachievable goals will do the opposite of motivating. As a result, unrealistic goals will lower your sales team morale as it will be almost impossible to reach goals.
Balance your sales compensation plans with your business needs, sales strategy and customer behavior. Consequently, you will have a motivated and engaged team constantly delivering results. Take a look at this blog post for a quick guide on how to set sales goals.
Failure to measure
Your sales compensation plans and salespeople need performance reporting. Therefore, they will understand where they are standing against their goals. Having a good measure of your sales department performance will make your salespeople comprehend how much harder they must work to reach their goals. Transparency is important because it leads to motivation, lack of information harms your sales strategies.
Provide details of performance metrics and spread the confidence in the sales compensation plans. Furthermore, this will also benefit sales managers. With accurate measurements and reports, they will make informed and precise decisions. And, a way to keep good track of sales reps’ performance is using Blitz. This sales compensation software will provide your team with the transparency you are looking for, and the measurements that will help you make decisions.
Late or inaccurate payments
Sales compensation plans that suffer from this symptom are most likely to use spreadsheets. Moreover, spreadsheets have limited capabilities and are not the right tool to use in one of your most important strategic processes. You may think that using spreadsheets is not expensive at all. But, how much money is wasted with all the calculation errors?
Using a sales compensation plans automation software like Blitz will eliminate these costly errors and overpayments. Moreover, Blitz appropriately motivates behavior and drives sales.
Remember that the first step in designing sales compensation plans is to analyze what your sales department must accomplish, establish priorities and set parameters to start working from there. At the end of the day, a sales compensation plan exists to provide clarity and focus for sales roles, define success for sales reps and motivate behavior. The consequences of failing on one of these are serious. But, issues can be solved by detecting errors in time and using great tools like Blitz.
Rawlins, Mark L. From Commission Plan to Compensation Strategy: Success for Today’s MLM Enterprise. 1st ed., InfoTrax, 2014.