9 years ago
January 4, 2015

5 Reasons Why Sales Compensation is Such a Big Deal

Learn why sales compensation is such a big deal to the success of your company.

Rhys Metler

Do sales compensation plans really make a difference in a company’s overall sales? Is it possible to use your sales compensation plan to speed up the sales process and help with job coaching? Can a sales compensation plan help you to promote your company’s goals?

The answer to these questions is, “Yes!” Learn why sales compensation is such a big deal to the success of your company.

1. Sales Compensation Is Linked to Motivation

Nothing motivates workers like the promise of more money, so your sales compensation plan should reflect this fact of life. If there isn’t a direct correlation between effort and compensation, you’ll find that your sales reps don’t work as hard or follow through as diligently after their initial contacts with prospects.

2. Sales Compensation Can Speed Up Your Sales

When your sales reps know that they’ll be compensated shortly after the close of a sale, they have a great incentive to keep things moving. This is good for everyone. Better efficiency in your sales reps means more revenue for your company. Sometimes companies find that their sales reps drag their feet on closing sales. This could be because it takes too long for them to be paid after the close of a sale. Sales people are typically motivated by immediate rewards, and if there is a lag time of several months after a sale, they will lose motivation quickly.

3. Sales Compensation Promotes Your Company’s Goals

Your sales compensation plan should be simple enough that your sales reps can explain it in just a few sentences. If it gets more complicated than that, your reps will get frustrated and your company’s goals will become obscure. A well-thought-out compensation plan encourages the sales reps to spend more time taking care of activities that are important to the employers.

If the compensation plan is too complicated, sales reps will default to focusing their time on activities that they think will generate the highest immediate returns. Think carefully about your company’s goals, and then develop a compensation plan that helps you to achieve those goals in simple ways.

4. Sales Compensation Provides Stability (Hopefully)

There’s a caveat with this one. If your compensation plan is well crafted, and you stick with it for a long time, it can provide stability for your sales reps, managers, and even customers. The problem is that many companies continuously tinker with their sales compensation plans, and this is very frustrating to sales reps. In fact, it’s so frustrating that it can lead to an unnecessarily high turnover rate among your sales people. The key to getting your sales compensation plan to provide stability for your company is perfecting it and then sticking to it.

5. Sales Compensation Helps Managers with Job Coaching

If your compensation plan truly reflects your company’s goals and allows you to see a sales rep’s strengths and weaknesses, it can be a powerful tool when it comes to job coaching. Managers often have a difficult time with job coaching. It’s tough to keep track of each individual sales rep and know what they need to work on and what they’re doing well. A good sales compensation plan, however, can make this easy because numbers talk. Sales reps who aren’t receiving the kind of compensation they’re after will automatically know they have problems to work out.

For these reasons, you can see that sales compensation is a big deal. If you’ve been dissatisfied with your turnover rates, your sales reps’ levels of motivation, your instability as a company, or the speed of your sales, re-evaluate your compensation plan and start fresh with a plan that will serve your company well for many years to come.

Rhys Metler

Rhys is a tenacious, top performing Senior Sales Recruiter with 15+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and daughters, BBQing on a hot summer day and tropical vacations.