Compensation is one of the most powerful tools you have as an outside sales manager to motivate, reward, and retain your team. But how can you design and implement a compensation plan that drives sales performance and engagement? Here are some tips to help you create a compensation strategy that aligns with your goals, reflects your market, and inspires your salespeople.
Before you decide how to pay your outside sales team, you need to define what you want them to achieve. Do you want them to focus on generating new leads, closing deals, upselling existing customers, or retaining accounts? Do you want them to sell specific products, services, or bundles? Do you want them to target certain segments, regions, or industries? Your compensation plan should reflect your priorities and incentivize the behaviors and outcomes that matter most to your business.
When structuring an outside sales compensation plan, there are several models to consider, depending on your objectives, budget, and culture. The most common models are salary only, commission only, salary plus commission, and salary plus bonus. A salary-only model is simple and fair, but may not motivate salespeople to excel or take risks. Commission-only is flexible and rewarding, but may create instability and competition among salespeople. Salary plus commission is balanced and motivating, but may be complex and costly to adjust. Salary plus bonus is focused and flexible, but may be challenging to set and measure goals and metrics. You can also mix and match these models or add other elements such as draws, caps, accelerators, or spiffs to customize your compensation plan.
Compensation model is almost the most important aspect of it all. Without a good structure, you won’t keep good people. With data, understand estimated compensation from commissions for the AVERAGE worker. It is critical you estimate this for the average because not everyone is a rockstar and they will sign on board with this false pretense in mind and it tends to add to pressure and becomes the #1 reason someone leaves. It doesn’t seem live upable, if you will. Once you identify the average commission, you can start identifying if it’s best as a salaried position, salary + bonus, a base + commission and at what rate, and beyond. But without the above and additional education on salary variables, you won’t be able to move forward at all.
Once you have designed your compensation plan, you need to communicate it clearly and transparently to your outside sales team. You should explain the rationale behind your plan, the expectations and criteria for earning compensation, the frequency and method of payment, and the process and channels for feedback and questions. You should also provide regular reports and updates on your salespeople's performance and compensation, and celebrate their achievements and successes.
Communication is always key even when it’s uncomfortable. Usually when it is uncomfortable, it is most important. In this case, be transparent with the guidelines, offer and compensation structure. A really awesome best practice for regular reports and updates is a mid-week call with everyone where you celebrate wins and commission/structure jumps and also provide an opportunity for individuals to ask the group for advice on different issues they are having within their sales process/role. We did this at a company I worked for a few years ago and that mid-week meeting really pumped up the statewide teams and it was awesome to learn best practices that I can start using to inch me even closer to my goal. Crazy motivation tool.
Your compensation plan is not set in stone. You should monitor and evaluate its effectiveness and impact on your sales performance and engagement. You should solicit feedback from your outside sales team and other stakeholders, such as customers, finance, and HR. You should also track and analyze key metrics, such as sales revenue, profit margin, customer satisfaction, retention rate, turnover rate, and employee engagement. Based on your findings, you should make adjustments to your compensation plan as needed to ensure that it remains relevant, competitive, and fair.
I do an annual salary checkpoint. I reassess where the competitive market is at, what are the competitors doing, what is realistic and understand any inflation that has occurred since the last checkpoint took place. Salary adjustments to match this are major moral boosters and also state your investment into your staffs well-being. This boosts trust in you, which translates to retention and output.
Compensation is not the only factor that influences your outside sales team's performance and engagement. You should also invest in their training, development, coaching, recognition, and support. You should provide them with the skills, knowledge, tools, and resources they need to succeed in their roles. You should also foster a culture of trust, collaboration, feedback, and recognition among your outside sales team and across your organization.
By using compensation as a strategic tool, you can drive sales performance and engagement among your outside sales team. You can also attract, retain, and reward your top talent, and achieve your business goals.