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CompensationMaster Newsletter Article, June 2004 Are you at risk of losing your top producers?
In our work with hundreds of sales organizations, we see
many making the same mistakes with regard to their top producers. To keep
from losing your best sales reps, here's how to avoid these common pitfalls.
Reward proportionally to their contribution
In many organizations, top producers are carrying the load for the new reps
and other low producers. This just isn't fair. You need to design your
commission structures so that even lower producers generate a profit for
you. That way, you can afford to pay your top reps more. Fair warning… if
you don't figure out how to do this, one of your competitors will.
Remove disincentives to greater production
Sales reps often stop working once they reach a certain level, either
because their commission gets capped or they are concerned that their
territory will be reduced. When you remove these disincentives and structure
commission plans correctly, you can motivate your top reps to keep working
hard year round, increasing revenue and profits substantially.
Occasionally we'll run into a situation where the
disincentives are in place because the CEO doesn't want anyone else making
more than he or she does. But this isn't an appropriate comparison. The
compensation sales reps receive is based on short-term revenue; CEOs are
typically compensated over the long term with ownership or stock options.
You should be delighted when you have sales reps making more than you do!
Reward the right behaviors
Sometimes compensation plans are so complicated that the reps can't figure
them out or they end up rewarding unproductive behavior. You want to design
plans to focus on what's most important for the company, which usually is
increasing market share and operating profit.
Maintain consistency
Some organizations will introduce a compensation plan, then halfway through
the year when the results aren't what they expected, they change the plans.
Their top people get frustrated and leave.
You need to model the results of your compensation plans
before you introduce them—using a modeling approach that has been proven
accurate in the past—so you know what's going to happen before you launch
the plans. Then you can leave them in place for a full year before tweaking,
giving your sales reps the predictability they need.
Well-designed plans retain your top reps, who are so
important to achieving your revenue goals, and reduce the hiring and
training costs associated with high turnover. They're a solid investment in
your future.
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