Five problems with sales compensation (and what to do about it)
Sales compensation has the primary objective to stimulate the right behavior. Many of today’s sales teams are struggling to create a reliable, predictable forecast and ever growing sales results. This problem is not the result of one single problem nor can it be solved with one magic bullet. However one of the keys to resolving this problem lies in how we are compensating sales teams.In summary there are five key problems with today’s (B2B Sales) compensation plans;
- We are using a ‘funnel’ sales process of which each individual stage has no relationship to the buyers process – in real life, a buyer goes through a journey of (information) discovery – a process that if implemented right never has a ‘cold lead’ or ‘closed’ stage
- We compensate using outdated metrics measured in call volume, quotes submitted and speed of turning a cold-call into a deal. We are NOT using metrics that impact the business such as the quality of the clients experience at each step of the way. Even worse we do NOT reward sales for the disqualification of an opportunity – which we all agree is the 2nd best answer – this results in the much dreaded ‘dead wood’ in the funnel!
- We focus most of our compensation on ‘hunters’ or even worse only on the top 10% of the top-hunters. In todays business this is NOT where the business and profits are generated. Growing business (and profits) are the result of an excellent client experience (pre & post sales) which creates the much demanded predictable and reliable numbers secured via a dedicated & success focused team – this team is often overlooked in the compensation (%)
- We compensate too late to affect change as we defer compensation/recognition till the payment of the deal has taken place. As a result we are creating a gap as much as 6-12 months. This gap disables management to stimulate the right behavior as your actions are related to consequences. In case a B2B sales pro misses two quarters and gets ‘let go’ you are effectively responding to something that happened over a year ago!
- Nearly every B2B sales team compensates using exclusively financial means – this is very effective for transactional sales HOWEVER using just financial incentives has a detrimental impact on complex B2B sales where a more sophisticated compensation method is needed that includes intrinsic compensation IN ADDITION to financial incentives matched to the skill-set of the team member and task at hand.
Dan Adams and I created this video – episode 5 in the series The Future of Sales is NOW – where we explain the problem in more detail.
Next week we will release – episode 6 – which presents a modernized view on how to take a client from a sales funnel into a client journey – and resolve the compensation that fits the needs of today’s sophisticated sales teams.