The Future of Sales Compensation
Let’s face it, most sales compensation and incentive programs are stuck in the dark ages. They certainly reward the winners, but do very little to help B and C-players develop into A-players.
Most programs take a sink or swim approach “When you close, we pay.” Not bad if you’re closing enough business, but what if you’re a future star getting off to a slow start. Not very motivating.
The truth is, there are better ways to incentivize and motivate sales reps and promote teamwork. And psychological studies have shown the traditional approach is just not optimal.
With rep turnover in B2B sales hovering around 30%, and intense pressure to increase sales rep productivity, it’s time to explore better ways to compensate and incentivize. It’s time to get the commission and incentives program right.
The psychology behind incentives
The “You do this, I’ll give you that” approach can be dangerous to motivation. Dangerous because it often promotes behavior not intended by those offering the reward.
I once sat on a runway for more than two hours waiting to take off. We weren’t exactly waiting on the runway, but pulled away from the gate. Passengers were restless, asking “why can’t we go back to the terminal and wait?”
At some point, a frustrated flight attendant blurted out “It’s because the flight crew is graded on our on-time departures. If we go back to the gate, we’ll be marked as a late departure.” Great, punish the customers for an internal reward system.
I am not sure that’s what management intended. Nevertheless, it’s what they got.
In the end, simple “do this, get that” incentive programs can be easily gamed by employees. It’s not malicious or negative behavior, but pragmatic decision making on their part. They are trying to maximize their wealth situation by focusing on the things the organization is rewarding them to do.
An example of a better approach to rewards and incentives is that used by the NFL. Players are rewarded using a fairly complex, multidimensional schema. They get a mix of individual goals for each game and for the overall season.
Some of these include:
- Internal goals for offense teams
- Internal goals for offense teams
- Internal goals for special teams
- Points Scored
- Points given up
- Conference wins
- Overall wins
- Playoff wins
Having a mixture of “big v. small” and “team v. individual” goals keeps players both encouraged by the small victories and invigorated to keep driving for the long haul.
Additionally, the reward system is comprehensive. Therefore, a players best chance at achieving their goals is to truly excel at their craft (rather than game the system).
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The big problem preventing change
So why doesn’t every sales team just copy the NFL’s approach? Simple. They don’t have the data. They can’t measure all the activities their sales reps execute because it’s not easily accessible.
There are no cameras watching sales engagement meetings, no statisticians measuring every yard gained, or first down achieved. It’s a lack of visibility. Visibility into sales activities executed, objectives accomplished, and milestones reached.
So currently, sales managers compensate and reward reps on the only real data that they have: results. Can you imagine NFL Patriots coach Bill Belichick in a team meeting, “OK, from now on, I’m only paying players for won games.”
A little ridiculous? Maybe. But sales teams have been working against this system since the dawn of the profession. Stuck with nothing but closed business to prove the hard work they pour in to the pipeline. Forced to only care about one outcome: winning. And, stuck with the myopic vision and lack of teamwork this type of reward system brings.
But… things are changing.
The future of sales compensation
Sales teams are beginning to realize that without activity data, it’s very difficult to manage reps to optimal performance. Without being able to track sales activities, compensating on the intermediate objectives that lead to success is impossible.
For years the response to a lack of sales activity visibility was stricter process, complicated CRM systems, and withholding compensation until the data was entered. Reps hate entering data into CRM—and trying to change that behavior is a losing battle.
But with the advances that sales AI has made, activity data harvesting and automation will save the day. It will allow reps to go about their business of selling, meanwhile their activities are captured, logged to CRM, analyzed, and evaluated. And once we know what reps are actually doing, we can begin to compensate and incentivize in more effective and rewarding ways.
Instead of just rewarding for wins, we will begin rewarding all the little behaviors that go into being a great sales rep.
- Are activity levels where they should be?
- If so, a bonus for that. Are the rep’s core activities converting into meetings and conference calls?
- If so, another bonus. How well is the rep engaging the buyer personas most likely to result in success? Bonus.
- How fast is the rep responding to buyer questions and inquiries? Another bonus.
- Product knowledge good? Another bonus.
- Is the rep using subject matter experts in the sales process? Another bonus.
- How is the rep rated by team members who need occasional help? Another bonus.
- How well is the rep qualifying opportunities and managing their pipeline? Bonus again.
- And, of course, is the rep bringing the results—the sales wins? Bigger bonus.
The benefits of this impending compensation transition are enormous. Instead of the “sink or swim approach,” reps will be rewarded for all the positive behaviors that lead to success—motivating new, average, or even low performing reps to follow a healthy development path—increasing productivity and reducing turnover.
And, not only that, teamwork among reps will be greatly improved. B2B selling is a team sport by nature, and aligning the reward system to support cooperative behavior will only further enhance productivity.
But the most exciting part is that this degree of sales AI not only enables management to reward reps for impactful work. It empowers them to coach where it’s needed and ultimately improve the rep’s performance overtime based on what they know is happening.
If you’re interested in learning more about what we’re doing to make this a reality for all enterprise sales teams, contact my team today for a live demo.
– Pete McChrystal, CEO & President of Accent Technologies, Inc.