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Wednesday March 29, 2006

What makes a good Sales Comp Plan?

Last week, I worked with a CEO on designing / redesigning his comp plan. He has a set up where the business sells subscriptions and the sales rep gets paid a flat % for first year, as well as a relatively high % of future years. The idea being that the rep needed to be focused on the future and not just selling now, and ditching later. Cool concept; worthy goal.

Now the business has changed. It’s evolved and the company is going to add new resources to take care of existing accounts. Thus reducing the load on the sales reps to ‘maintain’ the current accounts. So the question was “how to transition the comp plan, and not have the sales people feel bad.”

Huh, did I not use the Qtip this morning? You don’t want the sales people to feel bad? Um, excuse me, did I hear that right?

Yes, that’s the question. Should you build a comp plan so sales people are happy?

I say no. I say make ‘em feel just-not-so-good. Sales reps are inherently hunters. And hunting works best when you’re hungry. In the old cave man days, people ate what they had and then hunted when they needed to because food could only stay good for so long. That same basic survival instinct still works in the world — through sales people. They hunt until they hit a certain level. Giving them too much of the old base means they hit their comfort zone of income sooner. And I ask you, for the business, do you want that?

My rule of thumb: your sales reps should be complaining but not quitting. Remember that sales people get paid to negotiate the plan. Because if they do a good job with getting the plan set comfortably, they eat better or drive better that year. You’re not supposed to come to a good feeling agreement. If you are, you’ve probably given away too much. So the trick is to find the just-not-so-good feeling plan.

Oh, and since I probably won’t talk about sales plans for a while, let me point that the silliest mistake execs make is to cap sales plans. Good sales reps will never work under a cap. And so your best hunters go to your competitor.

Categories: Go-to-Market Strategies, High-Tech Case Studies