Sales compensation mistakes in your organization are often, a complete deal. This is due to the fact that sales are arguably one of the most crucial departments. When sales numbers are low, the consequences ripple throughout the entire organization.
For this reason, sales compensation mistakes in your organization n are dangerous to the overall health of the organization. Measures should be put in place to identify and eliminate any errors that could be detrimental to the overall health of the organization.
Design plans that motivate your salespeople and employees that could solve sales compensation mistakes in your organization
Sales compensation mistakes lie in the sale compensation incentive plan. They may not be quite as apparent as they may appear helpful to the organization’s sales growth. These mistakes may have always been present and might go unnoticed to the entire life of the organization.
To foster growth and guarantee the long life of the business, a strategic incentive plan has to be coupled with ways to identify and eliminate the most common compensation mistakes.
Take a look at some of the ways in which you can solve some of these sales compensation mistakes:
Compare against industry data
Sales in different industries have different difficulty and expertise levels often unique to those industries. It is, therefore, essential to compensate in relation to the industry standard.
Compensation is a key factor in attracting and retaining talented employees. Rewards based on the manager’s opinions or an outdated scheme will demotivate employees leading to turnover and the high costs associated with it.
Motivating wrong sales behaviors
Sales compensation is supposed to be aligned with the company goals. Salaries and bonuses are motivators of employee behavior. Having sales compensation at odds with organizations’ goals is a mistake.
For example, the sales compensation plan could drive the employees to meet their sales quotas while their morale is at an all-time high. This performance may be great, but it may not support the organization’s overall strategy as they could be selling one product that is being faced out instead of trying to acquire a market share in a product relevant to the company’s future.
Overly-complex compensation plans
A complicated sales compensation plan is a common mistake that is often overlooked. The allure of having a compensation system that integrates a lot of factors to deliver a fair and accurate result is always present.
However, this may create a system that could be hard to follow. This results in low motivation in the employees as they will not understand what they have to do to improve their compensation. The more complex the compensation plan, the more likely the rate of turnover or employee demoralization will be higher.
Establishing one compensation plan for all
In a bid to enhance simplicity, organizations often implement one sales compensation plan to be applied to all salespersons. This is a mistake as not all sales jobs are equal. Some salespersons, like senior management, have more responsibilities as compared to junior associates.
This leads to higher turnover and the costs associated with it. This is because it takes from the employees, the power which enables them to determine their compensation.
The solution is to implement a system that has tailor-made compensation plans for each sales role. Junior sales associates may spend most of their time cold calling clients or on the road while senior sales managers are on administrative tasks. A sales compensation plan that is geared towards responsibility and their day-to-day activities offers them power over their compensation.
Using manual planning processes
Creating a compensation plan manually lacks most of the conveniences offered by computing. It is time-consuming and prone to errors. Since it also lacks the search functionality, looking for one specific thing or transaction becomes tiring and mind-numbing.
Editing the plan to reflect changes in the business environment is also troublesome, making the methods static. This will also add more errors as the strategy relies on outdated information. It is also limited as you cannot create models or do proper forecasting.
The solution is utilizing computers. This is simplified in that there is off-the-shelf software you can use. The price of computing has lowered drastically over the past few years, so most of these integrations are affordable.
Unbalanced payout curve
It is crucial to determine when to offer payouts and when to stop. When the compensation plan creates too many losers or too many winners, the system becomes too easy or too challenging to game towards their own goals. Hence employees become demotivated, affecting their performance.
When a lot of people lose, the system seems unfair. If there are too many winners, it means the goals were not well set and undermines the entirety of the compensation plan. It is also important to consider other factors such as the high margins the business will get if it attracts more capable salespersons.
The sales department will influence whatever is happening in the rest of the organization. Therefore, there is great importance in identifying and eliminating compensation plan mistakes. A great solution is Blitz because it avoids all kinds of mistakes and manual errors. Continuous evaluation is essential in order to include effects emanating from a change in the business environment as well as the industry at large so that they stay competitive.