Is Your Commission Plan a Problem?

Want to create and sustain a top-performing sales team and get the steady growth you need for your business?

Rethink the relationship your sales team has with the money you pay them for what they do. Conventional commission plans are at the heart of a problem that’s shockingly widespread in sales organizations today: underperforming salespeople remain employed far too long in the the same workplace. Even worse: there remains a stubborn unwillingness to do anything about it.

Let’s look at how this happens, the reasons why it remains a problem, and how you can solve it.

1) How This Happens

An accountability program that relies on paying people commissions as its core reward is a sure-fire way of obtaining subpar performance. Salespeople aren’t meant to be paid for just showing up and doing adequate work: they’re meant to perform consistently at a top level so your business can grow steadily.

That’s what the money is for (or is supposed to be for).

Why then do so many business leaders instead just settle for subpar performance, year after year?

To answer that question, look at what happens in a typical company. Sales targets are set annually and half the team will hit those targets.

Half. That’s it. While 10% will be too new to measure effectively, the remaining 40% will continually miss their quota, despite having every opportunity to accomplish their goal.

Think about that last point for a moment: in a typical sales organization today, four in ten of your people aren’t doing what you hired them to do. And you keep rewarding them for this!

No business out there today would tolerate that kind of track record from their accounting department (can you imagine 40% of invoices not getting paid?)

So, why does sales get a pass?

2) Why This Remains a Problem

Here are highlights of the resistance I see from companies who know they have a sales performance problem but stay stubbornly wedded to settling for the status quo:

• “The chronic non-performers are paid less, so they are not costing as much to keep on payroll.”
• “It’s better to have a marginal performer covering a key territory than to have it left open to the competition.”
• “It’s best to leave them alone and let them quit on their own rather than fire them because its costs less.”
• “This is normal, and you can never have a team accomplishing 100% of their goals.”

All of these are excuses that keep sales leaders from achieving maximum revenue acceleration from their team. It treats salespeople as cost centers, rather than revenue centers. It also overlooks the fact that when poor performers are retained, your top performers leave because they don’t like to be part of a mediocre organization.

Unless you put individual accountability at the core of your relationship between your business and your sales teams, you risk being stuck in this endless cycle of subpar performance and a diet of excuses to justify that level of activity (or inactivity). Greater accountability hinges on creating a new relationship between performance expectations and financial compensation.

3) How You Can Solve It

I cover this in a case study in Chapter 1 of my book, Nonstop Sales Boom. In essence: the company in the review was successful in creating a team of supercharged sellers, but only after they began involving their team members in setting tightly managed targets and providing training where needed. Poor performers were either coached up or out quickly.

This is a repeatable approach that any business can implement. Therefore, tackle this problem once and for all using a three-step approach that I call Start High, Reach Higher, Stay Accountable.

Here’s how it works. 

Start high: Pay your team a high base salary. Make the salary the same as the on-target earnings would have been with their old base-plus-commission model.

Reach higher: Hitting targets are now the baseline minimum of continued employment in your sales department. Communicate this clearly and with a contract. Each target can be different depending on the territory, the tenure of the sales reps and the product mix. Add an accelerator commission for people who overachieve.

Stay accountable: Measure leading and lagging KPIs and communicate to the team weekly where they are at using a sales dashboard. Complement this with weekly coaching and hold each team member accountable for reaching their individual sales goals. As the year progresses, make decisions about who stays and who goes based on their willingness to do the work required to hit the goals, and their ability to hit their goals. Do not keep non-performers in place for any longer than five successive quarters.

Do it now.

Stop settling for status quo, subpar performance. Look carefully at your commission plan and ask yourself whether it’s built on assumptions that reward achieving minimum performance, or recognize and encourage top results from your sales team quarter after quarter, year after year.