Sales Compensation Plans and the Smart Sales People

Good sales people rarely pay attention to what their managers say or what is in their job descriptions. What they read, dissect and understand is their compensation plan. This tells them exactly what behavior you are going to reward and when.

I have had many discussions with human resources folks about the level of income of salespeople versus their non sales peers within the company. I have been forced to develop and implement income limiting comp plans then have to explain why sales have declined.

I was once told that we were having too many orders come in during the last two weeks of the quarter (sales compensation was measured on a quarterly basis) and to adjust the comp plan to discourage this behavior. To accomplish this we were told to cap the “over quota” sales percentages such that the sales people did not feel the need to “cram” a bunch of orders in during these last two weeks.

The new compensation plan did exactly what they wanted, except that we started to get many more orders during the first two weeks of the new quarter. Why? Because the sales people quickly figured out that by waiting until the new quarter each dollar of sales was worth more to them.

Northern Star Bottom Line: Be sure that your compensation plan architecture rewards the behavior YOU desire of your sales team.