WHAT MOTIVATED you most this morning? Did money come to mind first or was it something else? If you’re like most people, you had a vision of yourself accomplishing an important goal or winning the esteem of leaders and colleagues.
Maybe it was a vision of enjoying more time with your loved ones as the result of achieving your long-term goal. For some, it may be job security — performing at a level that makes you indispensable by always staying on task.
Indeed, money is a powerful incentive to perform. There is no question that people will do a lot for money, but commissions or cash incentives are only a part of keeping your sales team motivated and performing at goal-achieving levels. There are upsides and downsides to using the money incentive to keep a sales force working hard and performing consistently. So let’s take a really close look at commissions and cash bonuses, and then examine some other motivators that should be considered in your total sales compensation plan.
We’ll start from the assumption that earning more money is the top incentive to perform in sales. After supplying us with survival needs and creature comforts, high incomes can be a means to recognition, prestige and status. It’s a tangible sign of work and business success. People are attracted to wealth and that can bolster self-esteem — another powerful motivator.
Looking at two money incentive opposites, we begin to see the downsides of money alone.
Straight salary: Getting paid the same amount regardless of actual sales will have many people happy to show up, do the time and collect the pay. Those who work harder and sell more will almost always begin to question the fairness of their compensation and resent the slackers. A better offer could easily make your best salespeople bolt!
Straight commission: This is known in the vernacular as “killing what you eat,” and it doesn’t sound very nice does it? You are paid a percentage of what you actually sell. You get paid commission only after your company is paid, and nothing else. No revenue to the company, no pay for you! Your work effort and activity are worthless if they don’t directly produce sales revenue. As cold as this may sound, there are many high performing sales professionals that prefer this compensation, but they tend to make lousy team players. They are confident. They know how to sell, and that’s all they seem to really care about. They can certainly drive good revenues, but your ability to manage them won’t exist. They have plenty of other options.
Most companies offer some combination of salary and commissions for sales compensation. Many firms also provide cash bonuses over and above commissions for reaching a challenging sales goal. So, essentially, there are three basic combinations of money compensation: salary, salary plus commission and salary plus commission plus award bonus.
This leads us to the other kinds of incentives that motivate salespeople to strive for peak performance. We all share certain human emotional and value-based characteristics that can help drive us to reach our goals. Some of them are based on personal gain, and some of them are altruistic.
The ideal sales compensation plan combines noncash incentives with the right level of commission or bonus earning potential. The cultural makeup of your sales team, your industry, sales cycle and target market will largely determine the salary, commission, bonus, reward incentive mix that you use to compensate each sales person.
Let’s examine four of the most common and effective non-cash incentives:
Time off — Nobody wants to work every day. One reason to work is so you can do more desirable things during your time off. Paid vacation makes the time spent acquiring it more worth the effort.
Perks and rewards — A front door parking spot, new office with a view, Salesperson of the Month or Year award, all-expense paid trip, new company car ... One of the most powerful universal human motivators is the desire to be recognized. Perks and rewards like these shine the spotlight of success. They motivate two ways: the reward’s value itself and the recognition of high achievement and honors.
Competition and winning (contests) — “Throw down a challenge!” Most salespeople like or appreciate competition. It’s in their nature, and challenges to compete for highest sales numbers can liven up your sales team’s efforts through a healthy kind of peer pressure. A valued prize for the winner(s) can be easily budgeted from the increased earnings generated by winning the sales contest.
Team spirit and altruism — Some individuals receive their fulfillment by giving of themselves for the benefit of others, or the team. They may be quite happy with a moderate salary and no commissions. A skilled manager can recognize these people and provide intangible support through encouragement, gratitude and other positive feedback. There may be some selling situations in which it’s better to eliminate internal competition so everyone works together in support of each other and the organization as a whole. Some retailers have instituted such plans, generally with mixed results.
Again, designing a compensation plan that works best for your business requires a thorough study of your industry, target market, available talent pool and company culture. You need to understand how your sales organization generates profit and where there is risk of loss, all based on how you pay your sales force.
Recruiting the best sales talent means paying them commensurately for the value they bring you. Remaining profitable can depend largely on your company’s sales incentive mix. It must motivate with earning potential and inspire your top performers to feel good about working for you and your company.
This article was originally published in the New Hampshire Sunday News / Manchester Union Leader.