Right People, Right Seat, Right Comp
It seems sales hiring is heating up and that means we are having more and more conversations about compensation. Too often I see leaders so entrenched in their financial models that they can’t get the right person in the right seat, because they won’t provide the right comp.
Compensation plans should not be designed to be “set it and forget it.” The marketplace is constantly changing. The company needs are constantly changing too.
More Than One Size
While I am a staunch believer in calculating salespeople ROI on the sales and profit they need to produce as a multiple of what it costs you to have them on the team, I am not a believer in the one-size-fits-all approach. Oh, sure I understand the rationale behind standards. They guard against the weakest link and. protect against a rogue sales manager paying someone a “high” salary based on the belief that the person will absolutely produce.
The trouble begins, however, when the manager fails to set expectations or doesn’t hold salespeople accountable, or hangs on to them too long. This is not only an individual salesperson problem that should be fixed by strict pay rules but also a sales leadership problem that requires improvement and coaching, not rules that hinder the entire organization from being nimble.
How Comp Plans Fail
A common compensation plan mistake is having ranges of pay associated with the job which a manager must follow without exception. This generally happens because there are people on the team who don’t produce enough revenue and profit.
What it really means is that sales management is not doing its job well. Either managers are not setting clear expectations. They are not holding individuals accountable to the behaviors required to produce the necessary results. Or they aren’t coaching appropriately to determine if the individual is doing what is necessary in sales conversations or whether the salesperson even can do the job well.
Another common problem is that the leader has been burned before. I cannot count the number of times I see rules and policies built around the fact that a manager screwed up once. They hired someone who looked and sounded like they would do everything necessary to produce the revenue and profit desired, but then didn’t.
This experience clouds decision-making. Rather than wallowing around in underperformance and stagnation, use the experience to learn what to do differently the next time. Improve the process of hiring, setting expectations, holding the individual accountable, and coaching. I cannot stress enough the importance of coaching. Just make sure the individual is doing what is necessary from an activity standpoint first.
Why Salespeople Fail
I have stated numerous times that there are only two reasons: 1) Salespeople don’t do enough of the right activities. 2) When they do the right activities, they aren’t particularly good at them. Reason one is solved by expectations and accountability and reason two is solved through coaching. Correcting both reasons are required for success, and both must carry consequences if not resolved.
Lackluster recruiting efforts are another issue I’m seeing. It’s one of the biggest problems.
Companies are recruiting the same way they did 10 years ago. While they no longer put listings in the Want Ads section of the daily printed local newspaper, most companies are simply doing the digital equivalent and it isn’t enough.
Some things to think about:
- An ad that talks mostly about your company and not the ideal candidate likely fails.
- An ad that is not optimized for SEO is underperforming.
- Restricting your search to a recruiter who reaches out to individuals in their network is not enough.
- Trying to pinch pennies in a competitive hiring landscape will lead to failure.
- Ineffective recruiting efforts that produce few candidates sucks the life out of your organization.
So, let’s get back to how compensation plays a role. If you solve for the pitfalls discussed above, then there should be more freedom to pay what is necessary to get the right individual in the job. Just because you overpaid last time, doesn’t mean going outside of the “salary band” for the next hire is going to be a failure. Learn from the mistakes of the past, but don’t paint every situation with the same brush.
The Steps to Getting the Right People in the Right Seats with the Right Compensation
- Define the BEHAVIORS necessary for success in the role (not personality traits).
- Identify the reasons people may have failed in the past.
- Establish a repeatable, effective, and predictive process for candidate selection and weed out.
- Review the compensation plan for an adequate ROI if the individual produces as expected. And set a floor regarding the minimum required production for the individual to retain the salary being paid (regardless of what it is).
- Implement a coaching and accountability protocol that all managers must follow, then be certain to hold managers accountable to the program.
We have various tools to help and services available to easily implement all these steps. If you want our help, email me.
Another great place to start is with the Simple Profitability Plan, but remember that salespeople are not robots and therefore need interaction, oversight, coaching and sometimes inspiration. If you want optimal success, you cannot rely solely on the compensation plan to manage your salespeople