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3 Keys to Determining a Sales Performance Period and Motivating Your Sales Force

183:906269490 • September 27, 2022

How to create effective performance periods.

If you’re hiring a salesperson, chances are that part of the compensation you’re planning for them will be variable pay—commissions, bonuses, etc. This may seem like a simple concept. Maybe you’ve already determined you’ll offer a 10% commission on all sales. That’s great, but there are several other crucial factors to consider before hiring that sales role.


Get these things right and you’ll be off to a great start for motivating your salesperson and building trust.


How frequently can the salesperson achieve the objective for variable pay?


Said another way, what’s the sales cycle length and does it fit into your performance period? When deciding on performance management for sales, it’s important to consider the period of measurement. This is the period of time the salesperson has to meet quotas or targets in order to unlock a certain level of payout under the sales incentive plan. 


For example, you may have a quarterly period of measurement in which your salesperson can achieve 10% commission on sales up to a certain target level, and then they unlock a 15% commission on sales past that point. 


In this case, you want to make sure that not only does your salesperson have the ability to reach that objective within the quarterly period of time, but that they have opportunity to exceed that target and achieve greater performance levels and participate in higher levels of pay. Otherwise, you’re offering a reward that’s impossible to achieve, and the individual will ultimately lose their motivation. 


The best practice for the period of measurement is that it should correspond with the ability of the salesperson to manage the transaction within it (or at least the components they manage). Essentially, for the period of time you select, the salesperson should have the ability to do their job from end to end.


Does the performance period provide time for the salesperson to take multiple swings at the bat?


While you don’t want to make it
too easy for anyone to achieve their goals, you do want to allow for multiple attempts to close business or attempt to progress a sale across whatever finish line that you have established for the role. 


When considering the performance period, it’s important to consider how many opportunities are possible within the sales incentive plan period as well as how lucrative each opportunity has the potential to be. The distribution of transactions matters because the salesperson should have the opportunity to sell in each period of measurement.


If, as an example, your business is focused exclusively on procuring business in a single annual event or has heavily weighted seasonality, then you either need to acknowledge that with focused periods of measurement that are weighted to those periods of performance, or don’t attempt to carve up an annual plan into smaller performance pieces. 


As a general rule, the distribution of sales activity throughout the fiscal year should align with the performance period selected for the sales incentive plan.


Does the salesperson have the ability to influence the timing of the sale?


The primary reason for creating shorter performance periods into a sales incentive plan is to motivate your salesperson with the possibility of more frequent (and higher) payouts. If your salesperson doesn’t have the ability to influence the timing of a deal closure, there’s not much value in imposing shortened performance periods.


Consider your market, offering, and sales process. Does your salesperson have the power to impact the prospect and close the deal earlier? Can they influence an existing account to move faster or alter the budget cycle? If not, then there’s little reason to break up an annual plan or attempt to incentivize an action that is out of their control.


The ultimate goal of clarifying the performance period is to motivate the salesperson to meet or exceed organizational targets. Make sure they are able to run a full sales cycle from end-to-end within the period of measurement, that they have the capacity to close enough deals to reach or surpass their target within each period, and that they have the power to close deals faster. The ability to ensure that your sales team will feel fully empowered to be successful under the sales incentive plan will put you on a path to have an unstoppable sales force.


By 183:906269490 December 16, 2024
In my first Best Practices post, I talked about the importance of knowing what you can pay for your sales roles before worrying about what the market is saying. In my second post, I covered ways to utilize culture in a sales organization . The following Best Practice in sales compensation involves job content. Job content plays several roles in your compensation plan: 1. It gives your salesperson a guide to what success looks like in their role. 2. It gives you a guide to evaluating the performance of your salesperson. 3. It rationalizes differing levels of variable pay outcomes for varying performance levels. 4. It provides your organization with the structure needed to comply with any reporting, pay transparency, or other regulations. Hopefully, that’s enough to convince you of the importance of taking the time to define your new roles and revisit the definition of your existing roles. Now, here’s how job content actually does those things. Defining the job The first role of job content is to define the who, what, where, when, and how of the function. It can be tempting to borrow a job description from LinkedIn, Glassdoor, etc., with the assumption that the content will be similar enough to fit your needs. However, the way a specific role performs is unique to the organization it’s acting in, which is why it’s important to take the time to define the job from scratch. Here are the questions you should be answering in your job content: What does the person need to do on a daily basis? How does this individual pursue sales, and in what segment or with what type of customer? Where should they focus their time and attention when building a pipeline of deals? Who should they be interfacing with, both internally and externally? When do they engage with customers and/or prospects? What portion of the sales process do they own or support? How do they interface with and influence decision-makers? Now, even though I said to write your job description from scratch, that doesn’t mean this is the time or place to get too creative. Job seekers are going to be searching by job title or category, so it’s essential to stick to the common vernacular regarding industry jargon and expected job titles. Job Description: A Byproduct of Job Content Another positive outcome of creating job content for your roles is that you will have generated much of the information needed for a job description if or when you’re ready to hire. Information such as: Job duties and responsibilities that clarify the type of work and engagement with customers. Qualifications/Requirements that are both minimum and desired. Those include education, knowledge, skills, capabilities, and competencies. Performance measures of the role include items like achieving sales targets, new logo acquisition, development of pipeline, accuracy in forecasting, etc. With all of this information on file, it will not only be easier for you to prepare to hire for the roles you want, but it will also be easier to evaluate existing employees in those roles. Beyond all of that, you’ll be well prepared for competitive market research and establishing your variable pay program. I’ll be posting more best practices on the blog, but if you’re anxious to dive deeper into the subject of sales compensation, you can grab a copy of my book Starting Simple: Sales Compensation and consider working through the companion Workbook to build a sales compensation plan from scratch.
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