Sales leaders often have different views about how to pay salespeople, and for good reason, there really is no one way to compensate. One thing is for sure, however, sales compensation plans can be an important lever for attracting top talent and driving desired motivations and behaviors across the sales team.
In fact, according to a recent study conducted by Velocify and research partner, Steve W. Martin (Harvard Business Review contributor, USC instructor, and author of the “Heavy Hitter Sales” series) competitive sales compensation plans can shift the overall culture of an organization and drive long-term success. But how should you structure your compensation plan to drive optimal performance? Here are two key findings from the research:
Compensation influences culture, which influences performance: Corporate culture is often forgotten as a strong factor that shapes success. A sales-oriented culture, with a competitive compensation plan to reinforce cultural values, can have a positive effect on the success of the sales organization. In fact, research found a strong relationship between sales compensation plans and three important cultural elements: (1) organizational excellence, (2) morale, and (3) leadership. In the study, organizations that compensated above market level rated their organization much higher than the average in all three categories.
Commission caps put the brakes on great sellers: Compensation caps create a culture where mediocre is not just accepted but expected. Research found that companies where compensation was not capped reported higher quota attainment rates. In fact, 79% of sales managers with no compensation cap reported achieving or exceeding quota last year. Additionally, when the impact of capping compensation was analyzed for all study participants, the results suggest companies that achieved lower percentages of their revenue targets were more likely to cap compensation.
The bottom line – a high-performing sales team creates a strong, sales-oriented culture that is reinforced by a competitive and aggressive compensation plan. To dig into all of the key findings from this research, download: “The Sales Compensation Conundrum.”
Also, tell us what you think. What compensation strategies do you employ that motivate and drive sales success? Share your thoughts in the comment section below.
About the author: Nick Hedges is president and CEO of Velocify and a 15 year veteran of the Internet and SaaS industries. Nick has spent the last six years helping organizations accelerate sales performance and recently became an advisory board member for the Association of Inside Sales Professionals. Nick is a Fulbright Scholar, holds an MBA with Distinction from Harvard and a bachelor’s degree from Manchester University.