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Sales Comp Guy

Why do we do sales compensation?

183:906269490 • February 27, 2024

A conversation about the function and development of sales incentives.

I recently spoke with Sumeet Shah of Incentivate on the most basic principles of why we practice sales compensation. I shared that there are a few basic reasons that need to be explored in answer to that question:


We use sales compensation because everyone else is doing it.

 

The first and main reason we exercise sales compensation is because our competitors are doing it. This also requires some thinking, though. While analyzing the competitive environment is an important part of determining how to pay your sales team, you also have to keep in mind that your organization is unique.

 

There are some cases where incentives don't make sense, and those cases are unique to the organization, its values, and its circumstances.

 

I've said this before, but it bears repeating: sales compensation design is crafted to meet the needs of an organization for a moment in time in alignment with its culture, the specific outcomes being pursued, and its unique market strategy.

 

So before deciding on the type of sales plan design to use, we should first decide on whether to use incentives in the first place.

 

We do sales compensation because we believe people respond to incentives.

 

Another primary reason we jump into sales compensation is because we believe it is motivational. But again, saying incentives motivate people is an overly generalized statement that doesn't factor in the nuances of how and why incentives work...not to mention the times that they don't.

 

The fact is, people are driven by a variety of things depending on the goal. Ideally, you want an incentive program that uses extrinsic rewards that support intrinsic motivations to act or follow through on desired behaviors. And determining all of that is an experience unique to each individual organization.

 

Listen to the podcast for more.

 

The full conversation dives into even more of the factors you need to consider when shaping your sales compensation plan. You can hear the whole thing below or by visiting the Incentivate channel on YouTube.

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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