Sales Comp Plans, Revisited –Farquharson
I think the best compensation plan I have ever seen comes from a small commercial printer who has his priorities in focus: He wants new business. Remembering that salespeople follow the money, he pays 15 percent of all new business for a period of one year. That is, open a new account and you get 15 percent of anything that comes from that account for 12 months. After that, the commission plummets to 4 percent. Pop quiz, hotshot: if you were the sales rep that worked at this company, what would you spend your time doing? Me, too.
Oh, and let’s not forget about the challenge of changing a commission plan. I have never seen a comp plan change that does not reek of this message coming from management: My salespeople are making too much money.
Again, I refer back to my first sales job when someone in upper management came up with the idea of eliminating all compensation for one highly profitable product line and turning that business over to the telemarketers. They tried to sell us on the idea that it was good for us because, “This move will free up your time and give you a chance to expand your existing accounts.” I’m still scratching my head over that logic.
Life should be more simple than it is. Sales compensation plans should be no different. They should be fair and motivating and equitable. They should pay the salesperson in direct relation to the success of their selling efforts. Yes, there are many moving parts. But tying the sales compensation to value added is unnecessary and complicated. It is inevitable that management will look at a successful sales rep and say, “He’s making too much money.” But, before the manager changes the comp plan, he needs to think about what life would be like if that sales rep quits. And, then also takes clients with him.
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