A Subpar Compensation Plan Helps You Retain Subpar Sales Reps
You’ve heard people say you can have too much of a good thing, right? Well that is exactly what came to mind when one CEO told me he has had the exact same sales organization for more than 5 years. That’s right – no one has left this organization in 5 years! I asked him if his company was on target to reach his strategic goals for this year and got the “well sort of” kind of answer.
Turns out his revenue was off significantly. He hadn’t changed his sales compensation plans in years. The reps were well paid for what they did and every year they got a bump in base pay, too. In addition, the price of the products they sold continued to rise every year, automatically giving the reps more commissions!
When I asked why his reps stayed, his answer said it all –we are a great place to work and besides they make a lot of money here – why would they leave?
There are so many issues to be addressed here:
1. Do the commission plans tie directly to the strategic goals of the company today?
2. Are the sales reps paid appropriately for the work they do?
3. What would a new hire reasonably expect to earn?
4. Are the quotas aggressive yet realistic?
5. Do the formula payouts put focus on the right measures to drive the strategy?
6. How do you define underperformance and are any of your sales reps in that category?
One of the goals of your sales compensation plan should be to retain your top talent since turnover can be very costly. But if the company is below quota, everyone can’t be considered top talent!
When I have looked into the details in many examples like this, I find that the company is leaving revenue on the table because the reps are happy with their earnings so they stop working so hard. Learn how to make sales quotas work by downloading our tip sheet "5 Tips for Creating Sales Quotas."
I am curious of your experiences. Have you ever been in a sales organization that had 100% retention year after year? What was your motivation for staying? What eventually drove you away?