There’s a lot to dislike about most sales compensation schemes. They can be complicated and messy to administer. It can be challenging to identify the right targets and payout levels to incent the desired behavior and results. And, it’s almost inevitable that there are going to be some costly unintended and unforeseen consequences with whatever you ultimately decide to implement.
But to my mind, one of the worst things about sales comp plans is how easily they can become a poor substitute for sound management and training.
For some companies, it seems that the mere presence of generous sales incentives is like a pardon, excusing everyone else of any real responsibility for actively managing salespeople and teaching them how to be effective in the marketplace.
While these organizations might go through some of the motions…a “You can do it!” motivational session here…a few words of “Call higher!” advice there…the unspoken truth is that these companies rely on their sales compensation plans to do most of the heavy lifting around managing, directing, and developing their sales force.
Here’s how one Sales VP attempted to explain rationalize it to me:
With the right comp plan, we don’t have to spend as much on training, tools, and managers because reps are motivated to figure things out for themselves. And if they can’t, we haven’t wasted much money beyond their base.
Yeah. Wow. How’s that for abdicating responsibility?
What about the opportunity costs of having reps flounder around for months, burning down entire territories and damaging your company’s reputation as they desperately attempt to “figure it out for themselves”? What about the competitive exposure as missed opportunities ultimately get picked up by someone else? And what about the total lack of consistency and predictability of results inherent in a “sink or swim” approach like this?
Furthermore, why even have a VP of Sales? It sounds like all this company needs is a generous sales comp plan and everything else will take care of itself!
The point is that your sales comp plan is just one piece of the puzzle. It’s an important and powerful piece, to be sure. But it’s just one piece. And using it as a substitute for any of the other pieces? Well…that’s just a cop out.
PS: The executive quoted in this article doesn’t work for a public company, so I can’t give you a stock symbol to short 🙂
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