There are not enough best practices on how to compensate sales and business development professionals. Setting effective sales compensation has been a moving target since the first sale of anything ever happened! How do companies balance their need for more sales against the motivations and drivers of their sales and business development people in order to get what everyone wants?
You won’t get the silver bullet in this post (because there isn’t one), however, here is an approach worth sharing. Part of the problem is that the One-Size-Fits-All-Sales-People Compensation Program that many companies adopt creates that moving target that makes sales managers crazy. If the “one size fits all” doesn’t work, then a more flexible structure should be explored. A sales compensation system should be based on two things (HR and accounting folks will cringe because this will require more work for them):
Strengths of each sales/business development professional
The specific business development activities they accomplish
Bear with me on this one. This approach is based on the very fact that everyone has both strengths and weaknesses. Some sales and business development people are excellent at building relationships, others at qualifying leads and others at closing the deal. What if a company would pay their sales people to do more of what each sales person is good at?
First look at the many specific activities included in your overall Business Development Function. It’s those activities that are needed to complete the “race” to more revenue. Each one of these activities is worth something to an organization. Perhaps the organization places a high value on information and intelligence collected on prospects.
The test on how to gauge the value a company places on information is to watch how comfortable or uncomfortable management feels when sales people leave with all the data they collected on prospects while on company time. Most sales managers are angry when their sales people leave with contacts of prospects. That’s because that data is worth something.
On the other hand, an organization might not care as much for the contact data or even for relationships that have been built by the sales professionals but just wants the revenue numbers to grow. Period. In every case, the compensation structure for each sales professional could be built around the specifics of what management truly values. Those specifics would then be married to the strengths of their sales force. Different compensation programs for different strengths.
By John Hester