If you have a team of salespeople out there landing customers or clients for your products and services, then you most likely have a sales compensation plan already in place. Even something like an end of year bonus counts as a sales motivation plan – after all, you don’t give bonuses for no reason.
There are many different ways to design and implement a sales compensation scheme. Some are as simple as a yearly bonus. Other schemes are highly complex and need a team of people to administer them smoothly.
Sales Schemes Can Vary Widely
Many sales motivation schemes are based on earning commission. Within the field of commission-based sales schemes there are multiple variations in how they work, and how much they pay.
Take for example a sales person who makes $100k each year. If their company offers a 50/50 split between a fixed salary and incentive-based earning, that sales person will get $50k fixed salary, and the other $50k only if their targets and objectives are met. If that same person works for an organization with a 70/30 split, they will get $70k in fixed earnings, with the other $30k dependent on performance.
Different Sales Schemes Attract Different Sales People
Organizations might not realize this at first, but the type of sales scheme has a direct effect on the kind of sales people that are attracted to it. Just as each sales scheme is different, so is each sales person, and some will like one type of scheme more than another.
Sales managers can provide a huge boost to their company by taking time to consider what kind of sales people they want to attract, and making sure the compensation scheme fits those people. On the flip side, if a company is getting a certain type of sales people that don’t fit their ideal employee profile, they might look to the compensation scheme as the potential source of the problem.
The 5 Types Of Sales People
I recommend sales managers take a look at the bestselling book The Challenger Sales, by Matthew Dixon and Brent Adamson. In it, the authors list the 5 main types of sales people, each of whom has a different work ethos and approach to selling:
Reactive Problem Solversare very detail-oriented. Customers love them because they cross the i’s and dot the t’s, and are fantastic at post-sales follow up. They have a strong sense of responsibility which is popular with management.
Relationship Builders put solving the customer’s needs and building good customer relationships above everything. They create strong connections and customers tend to like them, but they are not always the highest earners.
Lone Wolves do things their own way. They get results (they’re the second most common type among top earning sales people), but they are hard to manage. They have an aggressive style and do things their way or not at all.
Hard Workers are always looking to improve their performance and develop as sales people. They’re always ready to go the extra mile to get results, and tend to have a “no quitting” attitude which makes them valuable in a team.
Challengersare the most common type of sales person among top earners. Challengers are assertive, and not afraid to dig deep into their customer’s psyche and challenge them. Challengers have a unique approach which they can leverage to make even difficult sales.
The Question Is – What Kind Of Sales People Are Wanted?
Sales managers must ask themselves what kind of sales people they want in their team. A lot of this comes down not only to the type of product and the ideal customers served, but also the business culture and the personality types that will fit best within that.
It’s important to look to the future, too – what kind of sales people will contribute most to the long term success of the business?
How Different Compensation Schemes Appeal To Different Sales People
Each incentive scheme will be better suited to some types of sales people than others. Let’s look at some of the common elements of incentive schemes that matter when assessing which scheme suits which type of sales person.
The mix of fixed salary to commission-based pay. Say for example a sales company pays a total salary of $100,000 a year. There are many ways to divide it up between the fixed and variable part: 50/50, 60/40, 70/30 or 80/20.
Different mixes attract different people. Sales people who love to go after new business and the thrill of the chase, such as Lone Wolves, will love a higher variable portion. Relationship Builders, on the other hand, will do better with a higher fixed portion so they can focus on building relationships.
Bonuses for over-performers. These kind of Incentive plans appeal to sales people who are confident in their sales skills and want to stay hungry and keep performing even after they hit their targets.
For example, if the leverage is 2x or 3x and the sales scheme pays $100,000 on a 70/30 ratio, then an exceptional perform can expect to get an extra $30,000, which is a powerful incentive. This style of scheme suits highly motivated sales types such as Lone Wolves and Challengers, and can also work well for Hard Workers who are always looking to perform better.
The incentive type. For example, let’s look at the difference between commissions and bonuses. Commissions are directly related to the revenue a sales person makes, and are paid as a percentage depending upon performance. That’s great for sales people who are very focused on hitting targets.
A bonus scheme on the other hand is tied to overall performance, including broader problem solving and providing value beyond direct sales. A bonus scheme may be better suited for Challengers and Reactive Problem Solvers who tend to dig deep with their customers and take on a broader role such as consultancy and support.
The mechanics of the scheme. A sales scheme often includes many mechanics, such as for example a cap (the maximum a sales person is allowed to make from variable compensation) or a minimum percentage of the target that must be reached before a payout is reached.
Can you imagine telling a Challenger or a Lone Wolf that they can’t earn any more! Some types of sales people do not do well with caps.
On the other hand, a Relationship Builder or Reactive Problem Solver might get frustrated with having to reach a minimum threshold, when they are working hard on elements that aren’t direct selling, such as building connections and solving problems.
Match The Scheme To The Ideal Sales People
Sales hiring managers will build a more loyal and reliable team if they match their sales scheme to their ideal sales people. If the incentives plan attracts a different kind of sales person than what they are looking for, it makes it hard to build a cohesive, productive, and happy team.
Sales managers who notice problematic attitudes and behaviors within their team would do well to start by examining the sales incentive plan. I recommend drawing up a detailed profile of the kind of sales person who is a good fit for the team. Then once that is clear, examine the sales incentive scheme and make sure it’s a good fit for the ideal sales people.
Create the right incentive scheme for the ideal sales force, and before long the company will have a dedicate, engaged and passionate sales force who enjoy their work and respond well to the sales compensation scheme.