Sales Compensation Strategies for Getting More From Middling Sales Pros
Most business leaders are focused on rewarding and retaining top performers (aka the ‘breadwinners) with the assumption that by making the top lucrative enough, it will increase everyone else’s performance as they try to get there (which is a false presumption).
Sales leadership and sales operations spend hours in meetings discussing how to design a sales incentive plan focused on motivating top performers and the amount of money that should be dedicated to them. Rarely is the conversation around the majority of sales teams–the middle performers–unless there is a need to pull pay from them to give more to the top.
Moving your middle even slightly can yield impressive results for a company, and there are many readily available studies to support this. However, rather than try to convince yourself of the value in moving the middle (which is the focus of the majority of articles), let’s focus on how to use your sales incentive plan as a key tool in helping you motivate greater performance from them.
Shifting Focus to the Middle
The most common lever is increasing payouts at a performance level right above where the 50th to 66th percentile performer achieves (i.e., so between half and two-thirds of performers achieve below this point). The rationale behind this is that with a bell-shaped performance distribution, an increase in payouts above the median performance level will create enough “pull” to shift the whole distribution upwards.
The increase in rates has to be significant enough to motivate sales representatives to increase their selling effort to achieve the higher payout level. For example, if the median performance is 70 percent of goal and two-thirds of reps achieve 85 percent of goal, payout rates would be increased at somewhere between 70 percent and 85 percent.
Another less commonly used, but effective way to move the middle is if possible, make your plan payout with a different frequency. Sometimes, moving the middle is just a matter of paying more or less frequently. If the plan pays monthly with commission rates that increase with volume, less frequent payouts may be needed as middle performers may not feel they have the opportunity to accumulate enough volume to achieve the higher payouts and the plan loses its motivating appeal.
If the plan is quarterly or annual with a very transactional sales process, more frequent payouts may be effective in creating performance checkpoints, and then the plan acts to ‘nudge’ the laggards. Of course, paying more frequently may be difficult to do with lumpy or infrequent sales, though not impossible with the use of cumulative plans (e.g., where payouts are made quarterly against an annual goal).