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Stability in Sales Compensation
By David Johnston, Sales Resource Group

In these difficult times, it is critical that sales compensation is reviewed and the need for organizational stability is not overlooked. It is imperative to look forward to the desired state of the company and how sales compensation can be used to achieve that end. Yes, the salesforce may need to shrink along with the rest of the organization, but the following crucial requirements for stability must be considered:

1. The best salespeople need to be kept. They need to recognize that despite current difficulties, their future is with the company.
2. The income levels of the salesforce, while perhaps lower that during good times, must allow them to live and meet their obligations without resorting to inappropriate sales behavior or forcing customers to buy just to achieve financial rewards.
3. Compensation needs to reinforce a sales focus that is clearly communicated toward customers that are important to the company’s future, increasing the depth of the relationship and the value gained from both organizations.

Keep Your Top Talent Pool
Maintaining a stable salesforce, motivated and focused on executing the precise tactical activities appropriate for the current market situation, is critical. To this end, communicating clear expectations of results should be the imperative and primary measure of effective sales management. It is easy in times of turmoil to lose sight of the things that are important sales deliverables. High levels of service and attention to existing customers is the hallmark of high performing salespeople. Performance shouldn’t only be measured in new accounts opened.

Remaining steadfast with targets that are unachievable only results in an unmotivated salesforce and will, even if not immediately, result in turnover. The premise behind sales compensation is that an incentive provides the impetus to initiate and reinforce certain desired sales behaviors. If the targets are too far outside of the achievement potential of the salesperson, they stop being an incentive and lose value. Good salespeople are also always able to secure a position, even in a tough market. Therefore, the risk with bad target setting is that you will lose your good salespeople and retain the average performers reducing your sales performance. Targets should be set to maintain at least a reasonable opportunity for sales success.

However, keeping target-setting should not go to another extreme of creating a vanilla sales environment — where performance takes a back seat to evenhandedness. Rewards should still pay off for overachievement. In our current market situation, management often takes offense to paying for overachievement when the company is not hitting its overall numbers. However, salespeople who overachieve assist in making up for those who don’t and bring you closer to the company targets than you otherwise would have achieved. Limiting their payouts results in small savings but turns off your top performers and can lead to greater and unnecessary consequences should they leave.

Keep Salesforce Income Levels and Behavior Appropriate
Maintaining an incentive mix that is extremely high (60% or more commission) in an economic climate where sales numbers are falling, sometimes dramatically, means that salespeople will likely struggle to make enough to meet their living needs. In these circumstances, they may discount excessively or accept suspect business in order to generate income.

To address these situations, some of the incentive component should be directed toward strategic initiatives that require levels of quantitative performance with an additional focus on desired qualitative elements. Rewarding for performing the “right” tactical activities secures sales with reasonable margins and a longer-term perspective on creating a sustained competitive advantage. Other qualitative elements to reinforce include planned sales execution and developing multi-level selling within accounts.

Keep Good Customer Relationships
Often, the suppliers that stand by their customers to create win-win results not only maintain but increase their share of customer wallet when times improve. Maintaining competitive pricing during these times can pay large dividends, especially with loyal, long-term patrons. Adding customer value and going above and beyond to meet the needs of the customer also take on new meaning when times are tough for both you and your customers. You could find cheaper routing for freight to save the customer money. Or, provide your design and materials expertise to a manufacturing customer included in your costs to reduce their product development overhead. These types of actions can pay you a bonus in sales for the future when they are looking to partner going forward out of the recession.

A final note to management: This is the time in tough economic situations when maintaining close communication between you and your salespeople and recognizing effort (sometimes even in the absence of results) can make the difference between maintaining a loyal and committed sales group and losing the dedication and trust of your people who are waiting to move on to a better opportunity.

David H. Johnston is President of Sales Resource Group Inc.

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