7 Reasons your reps are ignoring their sales compensation plan
August 10, 2016
1. Your plan is just too complicated and they have no idea what they should be doing.
When your compensation plan is too complicated the reps will interpret the plan and it may not be what you had intended. They will guess your priorities or sell what is easiest in hopes they will earn a good living.
In order for your plan to be motivating is should be simple enough to drive the desired results that are in alignment with your company’s overall sales goals.
2. The value of the sale is unclear at the time of the sale.
This a form of complexity. Often times plans will have things that are if, then, kinds of clauses. This can take the form of if I sell a certain amount of Product A and my overall margins are X, my commission rate is lower than if my overall margins are Z.
To be the most motivating the sales reps should be able to estimate their commission earnings at the time of the sales.
3. Crediting rules are unclear.
When crediting rules are unclear, the sales rep will wonder who will get credit for the sale and what the value of the sale will be for them. Without clearly knowing the credit value, the rep will not be able to estimate their commission earnings and you lose this valuable motivational tool. When there is a disgruntle sales rep and you find yourself in a lawsuit, this is one of the biggest areas of contention.
You crediting rules should clearly articulate the rules of who gets credit for what sale, the source of the data, the event that triggers the credit and the value of the sale.
4. There is a mismatch between the sales compensation plan and management direction.
I have said many times that a successful company must have a sales compensation plan that is aligned with the strategic direction of the company. Each and every sales activity should support the needed revenue goals of the company. Now if management is telling the rep to do something different than their compensation plan is paying them on, what do you except the sales rep to do? Ignore the management direction and focus on earning their commission?
The best compensation plans are designed by a team and everything should tie back to the company’s goals. Management direction should always be aligned with the company’s strategic goals, which should always match the sales compensation plan.
5. They aren’t paid accurately and on time.
I once talked with an international company who paid their sales reps quarterly and one quarter in arrears. So if a sales rep made a sale in January, they received the payment in July. In another company the sales reps all kept their tally sheets of sales they made and compared that to what finance was paying them, taking valuable time away from selling for this shadow accounting task.
Neither company understood the power of rewarding the sales reps as close to the event they can influence (usually the closing of the sale) and just how sales minutes were wasted. Each time the sales rep receives a commission check they are reminded of the terms in their commission plan. Accurate and timely commission payments are critical in rewarding the sales reps for work they have done and helping the company reach its revenue goals.
6. There is no measurement data available.
I once worked with a company that kept the measurement data a secret. Their plans were complicated and the sales data was not easily obtained. The reps were left guessing where they were against goal and how much they would make that month. Have you ever asked a top performer where they are against goal and been told I have no idea?
Measurement data allows the rep to see how they are tracking against their goals. It is also a powerful motivation tool when the commission plan is structured properly. Ideally you’ll have a what if analysis tool that will show the reps what they have to do to get to the next tier in their commission rate structure or make the quarterly bonus.
7. The commission plan is not rewarding.
Unrewarding commission plans often pay the same commission rate for each sale or have a small accelerated commission rate once a particular threshold of sales is obtained. They can also have a quota that the sales rep believe is unattainable.
The most rewarding commission plans have a quota that aggressive yet attainable and a commission rate structure that will encourage them to reach the next level.