After giving a keynote program called "Gourmet Living" recently, an attendee came up to me and discussed her challenges as a sales manager. The last three years have been tough and she was looking for new ideas for 2012 to excite her team and also to simply change up the routine.
Since my keynote program had been about creating a "menu for your life" and used many cooking metaphors, I started thinking about what her sales management recipe should be. If 2011 left a bad taste in your mouth, use the following ingredients to create a new recipe to make 2012 your best year ever.
Become a Detective
In sales management workshops, we always talk about "inspect what you expect." Once a week, review your sales team's CRM system to ensure they are using it properly and casually ask each team member about their certain activities within their key accounts. Once they know you are actually reviewing their accounts they will be more precise and begin to be more accurate. Next, make two extra sales calls per month with each sales rep. Confirm that hey can sell your firm and they are using the proper sales tools. These actions are not micro-management -- they are designed to provide you greater opportunities to coach and grow your team.
Reduce Fatigue
Recognize your sales team might be tired or somewhat challenged based upon the last three years of tight budgets and stress. Fire them up with new products or packaging/pricing, change the game with new times for sales and sales training meetings, or even rearrange the sales offices. Once a month, take your sales team on a field trip to visit a customer and let the customer "sell" your team on your products/services.
Find Creative Dust
Read a book on creativity and share it with your team. The truly great salespeople are the most creative and it is true that creativity can be learned. As a sales manager, creative sales strategies will push you over your quota. Get your entire team into a creativity fix.
Become an SOB (Student of Business)
Invest in sales management training, books and DVDs. Create your own network of other sales managers where you can discuss ideas, learn what is working for others and explore new sales management concepts. Push yourself to become a professional in 2012. Consider visiting other offices and view how their sales managers run their sales teams. At our Web site you will find free videos on "hiring and training salespeople" and other articles I have written on sales management. You might also go back and skim through the blog to look for other ideas.
While these are just a few ideas, I would enjoy reading your reactions or other recipes for success below. As a team of readers, let's build up a complete recipe for each as we work to make 2012 a feast we will always remember.
Posted by Ken Thoreson on January 24, 2012 at 11:29 AM0 comments
As a sales leadership consultant, I think this article by Lauren Carlson, "SFA 15 Years Later: Now Every Rep's Best Friend," hits on many valid points. The cloud and CRM usability are key elements in the acceptance of CRM, as is the price/cost issue, especially for the SMB market. The marketing campaign features are extremely important and the interface to accounting/ERP systems greatly improves the customer service aspect, as well as gives a more 360-degree view. They make CRM more than a salesperson's tool.
One other element that should be recognized is the "tech savvy" nature of reps today versus even 10 years ago. This has made CRM acceptance so much easier.
However, what is interesting is that forecasting accuracy is still a challenge for the reps/sales managers. Also, training and implementation of CRM is still greatly under-emphasized, and I find many organizations with salespeople using the same CRM system differently and not following a sales process properly. Third, this lack of discipline leads to inaccurate pipeline and activity reporting.
These few issues are the direct result of sales leadership and are training and management functions. The mistake I see in many CRM systems and vendors is that they focus on the salesperson, not on the needs of the sales manager or organization. Sales leadership requires a more forward-looking approach to build predictable revenue. With a greater proactive approach and sales management focus, the three topics I mentioned above would help the sales manager take greater charge of the CRM tool and it would be more of a useful tool for sales leadership.
Posted by Ken Thoreson on January 17, 2012 at 11:47 AM0 comments
Strategic sales management is often a weak link in solution provider companies. For the past 14 years, I have been working all across North America and internationally, meeting, speaking and consulting with organizations of all sizes and areas of focus. While every client engagement is unique, some problems are common to many corporate cultures and tend to prevent a company from reaching its business potential.
This month, let's take a walk through a hypothetical client site that illustrates many of the problems I've encountered over the years. We'll use "Law and Order" rules: "Although inspired in part by true incidents, the following story is fictional and does not depict any actual person or event."
Walking into the front office, there are a few chairs and a few outdated vendor awards on the walls, and employees pass visitors without offering a greeting or showing much expression or enthusiasm. This is not a good indicator for the type of reaction the office evokes from prospects who visit.
President
I ask for Bill, the president. I am warmly greeted and taken to the back office, where we begin to chat about his business, his vision, his frustrations and the lack of business profitability. My experienced ears hear: "They" just don't get it, "they" really don't work hard enough, "they" really don't know how to sell what we do and "they" don't seem to care about the business like I do. Bill is also concerned that his sales manager is focused on functions that have nothing to do with sales.
Vice President
Bill introduces me to his vice president of professional services: During the first 10 minutes of a 45-minute interview I hear a lot about how much time the sales engineers have to take to help the salespeople in every engagement and that the sales teams get all the credit. "They never take the time to learn the products. If it wasn't for my team and their expertise we would have no sales." When I ask when the VP last held a training session for the sales team, I get a shrug.
Salespeople
As I conduct interviews with each member of the sales team, either face-to-face or on the phone, I begin to connect the dots between what they're saying and my meetings with the president and the vice president. The salespeople say things like: "Management always seems to dominate every opportunity; they're always micro-managing what I do; the sales meetings are brutal, everything seems so disorganized; proposals are a joke; management seems to change what we do every 90 days; and they never seem to know what is going on."
Something else emerges from my recordings of each salesperson. Every representative tells a different story when asked, "Why do people buy from you?"
Assessing Your Own Company
While these scenarios are exaggerated, these are conversations that sadly take place among many clients we have served. Does anything here ring a bell about your company? As you read this in January 2012, it is an excellent time to assess the morale within your current organization and create a plan for the remaining portion of the year to fix elements in your company that need to operate more effectively.
A few concrete steps can go a long way. Create an ongoing sales training program; run monthly company meetings for all employees to bring teams together, increase communication and recognize achievement; make sure management meetings are organized to improve the focus on achieving corporate objectives; and make "soft" cultural improvements to increase morale and teamwork. In some cases, the list of projects can be quite long. Take a few each quarter and focus on those topics.
Creating a great organization takes time, vision, energy and a commitment to continuous improvement -- which, by the way, is the definition of leadership.
Posted by Ken Thoreson on January 10, 2012 at 5:38 PM0 comments
It's a little late to begin planning your 2012 sales plan, but in a conversation last week with a reader of this blog, I realized there may be others who have not formalized their 2012 plan. Here are some questions you should consider when you start:
- What went well in the past year?
- What did not go well?
- What are the key drivers?
- What are the key metrics?
- What are the risks?
- What are the opportunities?
- What are some of the specific factors you will be facing in 2012?
- What assumptions are you making about the market in 2012?
- What assumptions did you make about your offerings in 2011? Still true?
- What assumptions did you make about your company capability in 2011? Still true?
Posted by Ken Thoreson on January 03, 2012 at 5:25 PM0 comments
At the end of each year, I write down my personal and business goals for the new year in seven different categories. The challenging part of that exercise is I have to review the goals that I had set from the past year and grade my performance. I have saved these sheets from the previous 20-plus years and it's a telling experience: I have found there are always good goals, but sometimes unrealistic timeframes.
Review your performance over the past 12 months. Ask yourself, "Have I changed or improved my organization?" If you are a new reader make sure you review all of my previous blogs for ideas and tips to improve your personal or professional performance.
As I look ahead into 2012 and think about potential blog topics, it occurred to me that asking you to evaluate your current status on a few basic sales management categories might be a great was to get ready for the new year. Rate each category below on a scale of 1 to 5, with 5 being the highest:
- How comfortable are you that you know what percentage of the pipeline in the current category is required to ensure the sales budget is exceeded?
- How comfortable are you that you have enough pipeline potential in the 30, 60 and 90 categories to exceed future monthly quotas?
- Can you visually see all of your top 10 dollar potential forecasted accounts from your desk?
- How well are all key accounts targeted? Rate your plan to attack them.
- How high well does your interviewing process ensure the best candidate -- not the best available candidate -- is selected?
- Rate the quality of your three-month sales training program. (Is it defined and implemented? Do you have a salesperson development plan to improve the professionalism of your team?)
- Rate the quality of your CRM/SFA system. (Is it being used effectively? Is it up to date? Is it backed-up?)
- Rate how your compensation plan works. (Are your company's goals aligned with the compensation/quota programs?)
- How well are your sales leading indictors defined? (Are they measured, posted, graphed, analyzed?)
- Do you have regular scheduled and unscheduled "coaching" sessions with each of your salespeople?
- Rate the effectiveness of your sales contests and business games. (Are they planned to promote revenue and build teamwork?)
A score of 45-55 means minor tuning may be required.
A score of 35-44 means you should consider several projects.
A score of 25-34 means you need to take multiple actions.
A score of 0-24 means major assistance is required now.
Many of these topics are critical for building a high-performance sales team as well as increasing the predictability of your revenue. It's critical that a sales manager or owner know a few basic ratios of their business, such as the ratio of potential revenues in the pipeline to the defined sales quota versus actual attainment. If you track this information for six to nine months, you will find your closing ratios, the value of how much potential revenue must be generated each month to enter your pipeline, and what you need at the beginning of each month to attain your sales quota.
I also like the idea of "out of sight, out of mind." If you have major accounts, you must have a written plan of action, for each account, for at least three months. If you have major sales opportunities to sell each month, you must have their name and action plans visibly defined on your wall or desk. This will ensure you are consistently aware of your important prospects.
Since recruiting and interviewing are the most important aspects, making sure you do them right becomes critical!
Stay tuned to this blog as we move into 2012. I will be touching on many of these topics and others in greater detail as the year moves along. If you would like to suggest specific topics for me to cover in one or over several columns, please send me your ideas!
Posted by Ken Thoreson on December 29, 2011 at 5:20 PM0 comments
We're nearing that time when we need to start preparing 2012 budgets, new compensation plans and something most sales managers don't take enough time in developing: their 2012 sales kickoff meeting.
Already, many larger organizations are booking their sales conferences for the first quarter. That's where they will invite their sales teams, vendors, resellers and partners to hear their plans to make 2012 the best year ever. Keynote speakers, breakout sessions, new marketing plans and product demonstrations will all be coordinated to boost enthusiasm and excitement in what the new year will bring. I know this because I am booked for five events already.
However, just because larger organizations are planning their formal conferences, it doesn't mean as a sales leader you shouldn't be planning an event for your sales organization.
A yearly sales kickoff meeting can be organized as an off-site or overnight two-day program, or as a simple half-day event. You should schedule them no later than mid-February. However, the basics of any sales kickoff event should include the following planning ideas.
- Announce a theme for the new year. This should be a positive statement of your major objectives and something that can be reinforced throughout the year. "Be Brilliant on the Basics" or Nike's "Just Do It!" are two examples. Give your ideas for your sales theme for the year in the comments section below.
- Include time for sales training on sales skills. You might hand out a sales training book as a gift to each salesperson. This will be your first-quarter "must-read" book. You can use the book for extended sales training during your meetings. Also roll out your first quarter sales training plans.
- Announce a first-quarter sales contest.
- Announce a 2012 year-long sales contest, with a big prize for exceeding quota. Examples include a trip to a resort, a cruise or a trip to an island. Remember, these kinds of incentive programs are not expenses but paid out of incremental revenues/profits. The rollout should include written rules and pictures of the location. See my book Creating High Performance Sales Compensation Plans for ideas on sales contests.
- Describe and show your marketing plans for the first six months. This will show the salespeople how your organization is planning to support the sales team.
- Schedule the president of your company to give a short message on his/her philosophy on sales and the culture of your organization.
- You may or may not announce your new compensation plan at this event; it all depends upon the degree of change you are making. With minor changes, it's a great time, while major changes schedule a separate meeting. Hint: Do not roll out the new compensation plan as the last topic of the meeting. Schedule it early in the afternoon, if your event is a full-day meeting.
- Make sure you make the meeting fun! As the sales leader, work on activities that create the right culture and teamwork. Create a game that everyone participates in during the event.
- Make sure each salesperson presents their business plans for the year. Based upon the number of salespeople this can be done by breakouts into regions, smaller groups or as a single group. These business plans include not only forecasts but personal commitments to activity levels and professional growth.
- Bring in an outside speaker. This could include a customer telling of their satisfaction with your firm, a sales trainer or a motivational message that propels your team to excellence.
This is your time to bring a coordinated program that sets the tone for the new year. Make sure you take the time to do it right. What additional ideas do you have? Share them below.
Posted by Ken Thoreson on November 14, 2011 at 1:22 PM0 comments
I read a recent article in the Economist titled "The Art of Selling: The Death of the Salesman Has Been Greatly Exaggerated." Speaking as a salesperson for many years, a sales leader for 15 years and a sales management consultant for the past 14 years, this article went right to the point of what many of us write already know.
Quick example: Recently, I purchased an iPhone from AT&T. The AT&T retail facility had great service. They welcomed me to the store, shared friendly conversation, helped me save money on my existing account, and the salesperson even walked me to the door on each of my two visits. AT&T even responded to my e-mails. Overall, a well-organized retail customer approach.
Just yesterday, I walked into an AT&T store in NYC to purchase a carrying case for my new iPhone and received the same solid attitude and sales process -- complete with a walk to the door! This impression was of how a strong sales focus impacts a transaction.
Sales is built on trust and confidence. In some minor products, this can be accomplished by smart marketing. However, professional salespeople do drive emotions if properly hired, trained and managed, and they should be the profit center of any organization.
One point that the Economist article misses is why some companies have failed and why others have grown. Sales-focused organizations have penetrated their existing customer base at higher levels and added net new clients at higher rates through a well-crafted salesperson or sales process map. However, it is my belief that it is critical for organizations' sales leadership team to be focused on success -- by building a belief in their mission within the sales team, and by creating a sales training system that reinforces sales strategies, sales process and prospect buying emotions.
I have often written about the need for sales leadership to set the tone for the culture of the organization, as well as the level of expectation. Sales and sales management are the critical success factors to lead us out of the negative economic conditions that exist today. Bottom line: To make salespeople and their impact relevant, sales leadership must take a proactive approach -- not only with their organization's executives to drive the need for salespeople, but in the day-to-day management of their team's ability to execute.
Posted by Ken Thoreson on November 07, 2011 at 1:07 PM0 comments
In past blogs, I have written about eating pizza, "gourmet living" and many ideas that are designed to improve the operations, culture and productivity of your sales team, as well as the sales manager's.
As I sat in the airport on a recent Monday morning on my way to New York City to speak at an event, it occurred to me that those first two or three hours on Monday are critical to setting the tone for the week. However, as a sales leader, you need to be prepared before that alarm goes off on Monday.
On Sunday afternoon, I printed my boarding passes. That evening I packed a bag, packed up my computer and business folders, and placed them in my car along with my overcoat. I also set aside my clothing for Monday and, after packing a few last items, I was on my way. A short 30-minute drive later, and I was easily in the airport and through screening.
That organization kept my week from starting on a negative note. It made it easy for me to focus on the work for the week, and gave me time to prepare without being rushed. So the question is, are you and each of your salespeople prepared for the week?
A while ago, I wrote a blog titled "Sunday Night Sales Management." While I don't really suggest you call each of your salespeople every Sunday night as my first sales manager used to do (see blog for details), you can set the tone several other ways:
- Start on Friday afternoon. Depending on the maturity level of your sales team, many organizations hold their Monday morning sales meetings on Friday afternoons. Everyone can discuss the past week and review their plans for the coming week. This will reinforce the need for activity and planning, and on Monday everyone is ready to go. You might take the time to simply review everyone's schedule for the coming week with a brief one-on-one also.
- Start over the weekend. Take a few minutes to simply review each salesperson's planned activity and key prospect activity. By sending a few e-mails to each of your salespeople over the weekend, they will realize they will need to be prepared for Monday and the following week. Inspect what you expect!
- Start on Monday morning. If you have a Monday morning sales meeting, be prepared. Have your information ready, make the meeting worthwhile and positive, and set the tone for your desired culture. Be organized. If you would like a copy of my "Sales Manager's Sales Meeting Agenda," contact me at Ken@AcumenMgmt.com.
The rest of the morning be active, upbeat and accessible; don't lock yourself up in other management meetings or be out of the office. Get everyone feeling revved up and help them find the rhythm.
Posted by Ken Thoreson on October 31, 2011 at 4:05 PM0 comments
I have often stated that a sales manager should spend between 15 percent and 20 percent of their time recruiting and interviewing, but as you move through October into November, you'll need to increase your recruiting focus.
Around this time of the year, like it or not, every salesperson is assessing their current status, their organization, what they are selling and a pending new compensation plan in 2012. By increasing your recruiting now, you will capture the attention of potential salespeople. And by adding them now or even at the first of the year, you will be in position to exceed your 2012 sales goals. What should you do?
- Place a display advertisement in the business section of your local paper -- not in the help-wanted section.
- Review your resume folder or competitive salesperson list. Check your won/lost reports and find out who the salespeople were that won orders during the past year. Call them.
- Contact your vendor account managers and let them know you are looking for additional salespeople. They may know quality salespeople to contact.
- Increase your networking activity. Attend a few extra events and let everyone know you are looking for quality salespeople.
- Make sure everyone in your company knows that you are recruiting. Set up a referral bonus plan.
Obviously, make sure you have a well-defined interviewing process to effectively select quality candidates. My book may be of value if you haven't been trained to hire salespeople. Recruiting High Performance Sales Teams includes additional recruiting ideas, interview questions, scorecards and a bonus section that describes a new salesperson on-boarding process.
Posted by Ken Thoreson on October 24, 2011 at 10:41 AM0 comments
One of my more popular blogs last winter was "Zen and Art of Snow Shoveling" based on the famous book Zen and Art of Motorcycle Maintenance. After yesterday, I thought I might leverage that title one more time.
Yesterday was a lovely fall day in the Smoky Mountains. The sky was bright blue with no clouds, the leaves were changing into brilliant colors, the air was warm, and I had a 1 p.m. tee time. Unbeknownst to me, another couple had signed up to play with my wife and I. As a not-great golfer, I became concerned when I saw the other man, Ed, begin to boom his shots on the driving range. On the first hole I was still somewhat nervous, but made a double bogey on a long par 5. Moving to the second hole, I hit a great drive.
But it was the next thing that happened that made the afternoon a wonderful experience: Ed began to compliment everyone's shots and form as he continued to be a long and accurate ball stroker. My second shot hit the green -- the first time I had ever done that. On the third hole I began to get on a roll. By the end of the day, I had a few pars, a birdie, and scored my best round of the year. Even with losing five balls, I shot a 93! Now, while that might not be good for many readers, for me it was a positive experience.
What does this have to do with sales leadership? From the first hole, which I didn't pick up until the second, Ed was setting the tone for the day -- compliments, some laughs but setting a standard on distance and accuracy. He would pick up broken tees, cleaning the tee box and fixing ball marks on every green. Pretty soon, all four of us were encouraging each other, managing the course and enjoying the experience. I found myself concentrating more clearly, working my shots better, and even when Ed gave me a tip, I appreciated his concern to make my game better
As a sales leader are you setting the standards of expectations? Doing the little things (like cleaning a tee box) to make sure your team is executing more professionally? Making sales calls with your team and providing strategy and sales tips to your team to make them better? It was the entire approach -- by everyone -- to the afternoon that made the difference. Is your team helping each other? Is everyone in the organization encouraging and pressing for excellence?
Have a great fall -- focus on the details, push your team for more, but set the tone with positive strokes and perhaps you will finish 2011 as your best year ever!
Posted by Ken Thoreson on October 17, 2011 at 10:56 AM0 comments
My normal reading pattern normally is a "business book," then a "fun book," and then back to a "business book." This routine lets me read a diverse array of books, and keeps me current and thinking creatively. The latest business book I finished is titled Corporate Entrepreneurship: How To Create a Thriving Entrepreneurial Spirit Throughout Your Company. While the book is aimed at corporate America, it is also helpful for small businesses.
Over 20 years ago, I worked for a small business in Minneapolis. During that time I had an idea for a business that was related to, but not directly aligned with, the small business' main focus: selling software and computers to other small businesses. My idea was to create a software testing laboratory that would validate software prior to its release by the software developers. This would lower the number of bugs and improve profits.
Long story short, while that software testing business is no longer a part of the original small business, it has survived and prospered. And within that same original small business, a specialized software product was developed and a separate focus started that led to it becoming the No. 1 software product within its vertical market!
Many of the challenges I faced within the small business aligned with the issues authors Robert Hisrich and Claudine Kearney brought up, even as early as the preface. As a business and sales management consultant for the past 14 years, I have witnessed many organizations attempting to add new business opportunities within their current structure -- only to run into the same obstacles. This book would help any leader at any level of organization improve their ability to adapt and take advantage of potential new opportunities without disrupting their current business models.
I have also observed many organizations jumping into something new too quickly. The authors provide in the first chapter a process to help both the organization's leadership and the entrepreneur or adventurer to identify and evaluate the potential of the opportunity. This is well-written, with great tools, and excellent for any level of business. As in my personal experience, the owner of the business encouraged creativity; Chapter 2 identifies specifically leadership's role in "promoting, facilitating and supporting entrepreneurial activity."
One of the best chapters covered "The Internal Politics of Venturing." Let me say this again: This book is an excellent read for both small and large business leaders. In any organization, the political drama can drain business opportunities. The other chapters I found very interesting were on compensation within a corporate entrepreneurial environment and funding the venture.
I found the content straightforward, easy to read, with great examples from organizations like Apple. What I really came away with is an excellent read for any level of large corporate management that wants to create a challenging environment and needs to create a playbook for innovation -- this book will provide that. For small business owners this book will lay out a process to assist you in making better decisions, improve your new business ventures and create an atmosphere of success.
My favorite quote is "Take advantage of the opportunity of a lifetime, during the lifetime of the opportunity." Corporate Entrepreneurship will help get you there!
Posted by Ken Thoreson on October 10, 2011 at 10:53 AM0 comments
This week's blog is an excerpt from my new book, "Creating High Performance Sales Compensation Plans."
When it comes to how businesses pay their salespeople, there's no one-size-fits-all approach. That's especially true for any company that is diverse. Each has its own business, margins and mix of products and services. Some pay commission based on sales, while others only pay on margin; still others blend both with incentives and special bonus plans.
No matter which approach you use, success depends on awareness. Your sales management team must understand your company's overall goals and structure compensation to align with them. In short, sales compensation should be not just a tactical focus for your organization, but a strategic one as well.
Sizing It Up
Compensation plans shouldn't be developed in a vacuum. You and your sales leaders need a solid grasp of your overall industry and your organization's place in it. You'll need to factor in variables such as new product launches and major promotions, as well as consider your personnel structure.
You should also address these questions: Is your company a start-up or an established business? Are your sales goals orders- or bookings-based? How long are your delivery cycles? What are your objectives: to secure new clients, increase average order size, reduce selling expenses? Do you want to open new vertical markets, focus on the profitable aspects of your business or increase certain activities, such as cold calling? Each answer will help them design a compensation plan tailored to your company's specific needs.
Finally, take a hard look at your sales organization. Take the time to set goals and analyze gaps. For instance, do you need to attract new representatives to make C-level sales calls? Do you want to retain employees to build a long-term, client-based sales team, or is rapid turnover acceptable because it provides new blood? Such considerations also play into compensation planning.
Understanding Cost of Sales
Of course, you can reduce selling costs and enhance profits by capping sales compensation, but in the long run you get what you pay for. If you hire good salespeople and compensate them poorly, expect high turnover, which comes with costs of its own. A sales plan that compensates strong performance will allow you to attract the best salespeople -- and retain them as well.
Calculating the cost of sales (CoS) is an important part of planning a compensation package. For a quick CoS ratio, simply take an individual's salary plus commissions earned at 100 percent of quota and potential bonus opportunities, then divide by that person's revenues to obtain the percentage. For example, if a salesperson earns $150,000 in total compensation and sells $1.5 million of products and services, his CoS is 10 percent. A more sophisticated approach adds in marketing expenses, corporate overhead, direct expenses paid to the salesperson and expenses related to sales support costs.
Once you have determined an acceptable CoS range, you can fine-tune the commission plan. If you sell Microsoft offerings, services and other more product-focused solutions, it's critical to find a blended CoS, which takes into consideration the margins of service and lower margins of product sales. That can allow you to achieve the desired CoS within your compensation framework.
Examining the Options
Compensation plans vary widely, but all should include "accelerators," that is, increased commission rates for employees who achieve target sales levels. Following are a few common examples of different plan structures:
- Profit-Based: Commission rates change as margin levels increase. These plans are generally based on invoice, product or monthly averages of margin generation.
- Revenue/Quota: Compensation is based on sheer volume achieved over the previous sales period or on a percentage of a quota achievement.
- Balanced: Compensation is based on margin, revenue and a third component, such as quota attainment.
- Team: Bonuses go to all team members when quarter-to-date (QTD) sales goals are achieved.
Let's examine which types of plans work best in which scenarios. If your company has high revenue-growth objectives in a boom market with little competition, use a plan with aggressive accelerators. Another option involves offering higher base salaries and lower commissions. An advantage to this approach: You may not need reps with top-notch sales skills because, in this case, they're primarily order-takers.
The situation changes in a slower-growing market with many competitors. Here, you might adopt a "protect-and-grow" revenue objective to play defense against rivals, while using a margin-based plan to upgrade accounts. The idea is to gear compensation to account for growth while providing bonuses for new accounts.
If your company's goal is to grow revenue and focus on new account conversion programs, choose a plan focused on the percentage of sales growth quarter over quarter or annually over named accounts. Certainly, using a quota-based compensation plan can achieve this objective, too. This scenario requires strong sales compensation with quarterly bonus emphasis on revenue gains from new business.
Tailoring Tips
Here are a few final considerations to keep in mind as you customize your compensation plan:
- In new organizations focused on expanding within existing markets, the compensation plan will differ dramatically from that of an established company in the same industry. A mature, market-dominant company that receives a large percentage of its revenues from a small, loyal customer base can offer lower commissions and, perhaps, lower overall salaries. But a newcomer to an existing market probably needs to offer higher compensation to attract top-performing salespeople who can build a strong customer base.
- New organizations in new markets need compensation plans reflecting the volatile environment, usually with higher-than- average base pay.
- Companies in transition or undergoing a turnaround typically experience a higher CoS ratio; they may be best served by flexible plans incorporating morale- and team-building components.
- Organizations positioned for high growth should develop plans covering brief, six-month periods. This will let management test theories and change direction while allowing the sales team to adjust accordingly.
No question about it: Creating an effective sales compensation plan is hard work, but the effort typically pays off in both improved sales performance and achievement of your corporate goals.
Posted by Ken Thoreson on October 03, 2011 at 10:36 AM0 comments