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SHOULD YOU CHANGE YOUR COMPANY’S SALES COMPENSATION PLAN?

Carrot_Dangled_290Does a sales professional need a carrot hanging in front of them in order for him or her to achieve their maximum amount of sales?

There’s a pair of articles from Harvard Business Review that add excellent food-for-thought on the topic of sales compensation plans.

 

Daniel Pink shares in “A Radical Prescription for S

ales“:

What if paying salespeople commissions is
 rooted more in tradition than logic? What if it’s a practice so cemented into orthodoxy that it’s no longer an actual decision? That’s what a handful of companies have begun discovering.
To the surprise of many, these firms are showing that commissions can sometimes do more harm than good—and that getting rid of them can open a path to higher profits.

 

Could it be true that the 60/40 base salary/commissions model is showing some weaknesses? Could a 90/10 split keep motivation up for sales team members, and even raise team sales?

I have to admit that with my decades in the industry, I’m fairly settled into the 60/40 mindset. You may be as well. This discussion, or variations of it, have risen and fallen over the past few decades. But…there may be something to this idea. It certainly wouldn’t be for every professional sales organization, but it could be the change needed for quite a few of them.

The article dives into some interesting research about the type of tasks we do as being either “algorithmic” or “heuristic.” I recommend reading that section before writing off the idea.

Pink ends with some thoughts I share with him:

Should every company forswear sales commissions? No. But simply challenging this orthodoxy helps us recognize that selling today is sophisticated, complex work—and that the people doing it therefore require incentives beyond a dangled carrot.

Additionally, you may find Mark Roberge‘s article, The Right Way to Use Compensation, to be an interesting read on the topic. Be sure to read the paragraphs under the “Before You Change the Comp Plan…” sub-header.

An important quote from this article is:

The ideal plan is tailored to the company’s stage of growth.

QUESTION ::: Whether you’re a sales professional, a sales manager or an executive, would you be willing to entertain making a change like this for your organization?

Let’s talk about it…

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2015 Guide to Sales Optimization: Restoring Sanity to Sales

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