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How do you incentivize sales people and compensate them correctly?

By August 18, 2011February 19th, 2015No Comments

Compensating your Sales people correctly can be a great challenge to the average business manager/owner.  If you don’t compensate them correctly or adequately, your sales people’s production may suffer, which will directly affect business growth and profit.  If you do incentivize them correctly but pay them too much, it could create future problems related to growth and or profitability of your business.

Below are 7 key points to building a strong sales team:

1. Consider a Compensation Model prior to targeting and hiring sales people.  It helps to have a good understanding of what makes some people “tick”, yet not others.  Maslow’s Hierarchy of Needs states that there are a number of aspects that generate needs for any person, some of which may be of more interest to one person and less interest to another.  Once you understand which aspect(s) motivate people, you can create a better environment to help create greater success.  According to Malsow, people are motivated by need, from the most basic biological/ physical needs (food, shelter, sleep, etc.) and safety needs (security, protection, stability) to the more emotional needs of belongingness (relationships, work group) and esteem needs (achievement and reputation) to self-actualization needs (personal growth and fulfillment).  For example, someone who is unemployed would be motivated through the fulfillment of the more basic physical and safety needs, whereas a person who already has job security, would be more motivated through promised fulfillment of esteem or self-actualization needs.

2. Hire the right team of sales people.  Before hiring, understand the type of sales person you need and then target them.  Are you looking for an “order taker”? This is a person who can call on existing accounts and build great relationship with the client.  Are you looking for a sales person who can “make it rain”?  This person has the ability to create and generate business.  If they are able to “find” business then they are the “hunter”. Understand what type of sales person you need and then target them in recruiting.

3. Adhere to the “Three A’s” when hiring.  Once you understand the type of sales person you are looking for, remember the “Three A’s” when hiring for a sales position in your company.  The first and most important “A” is Attitude. The right attitude is everything when hiring people.  If they have the right attitude they will go through the wall for you to close business and follow the direction of the company.  Attitude is vital and without it, you have the wrong person on your team. The second “A” is Aptitude.  Ask yourself if s/he has the aptitude for the position of the company. Webster Dictionary defines aptitude as “capability; ability; innate or acquired capacity for something; talent”.  If they don’t have the aptitude or capability or ability to take the sales position, then s/he is the wrong person for the company as well.  The final “A” is Altitude, meaning, how high can they go? How high do you need them to go? Will they plateau at a certain point and coast?

4. Beware of complacency.  The next concern when hiring sales people and thus managing them is complacency.  Most sales people will reach a point of complacency and then coast in the job.  Less work and more play becomes their mantra. The key challenge for management is to do all you can do to prevent complacency by your sales people.  Most people become satisfied (and have obtained fulfillment of Maslow’s higher level of emotional needs) once they attain job satisfaction or reach a particular level of income or status.  With sales people, the challenge is to prevent this from happening.

5. Utilize your Compensation Model.  It is vital to keep sales people motivated and “in the game”.  From a managerial standpoint, it is far easier to compensate sales people and steer them in the direction the company wants them to go than it is to create compensation models to drive operations people, where you have to rely on coaching and management techniques.  Sales people are experts in understanding compensation models and how they can maximize their income in the quickest time frame.  They are usually very highly motivated and understand how the game works. This being the case, it is imperative that you find a compensation model to drive the sales team to do what you want them to do.

6. Understand what your company’s objectives are and then create the compensation model to attain those objectives.  For example, if your interest is to expand and grow your client base, then the compensation model needs to reward your sales team for new business and retention. You can create additional incentives to ensure that a large portion of their pay will be derived from new business acquisition.  If it is imperative that your sales team be involved in the retention of clients, then you need to find a compensation model which will reward them for retaining and maintaining great relationships with clients. If they lose clientele, you must ensure that this will affect their compensation. This is a delicate area because if your operations team is not equally committed to retaining clients and the service or product you are delivering is not up to standard, then the sales team has no chance to retain the business no matter how great their relationship is with that client.

7. Do all that you can to ensure that the product or service you deliver is “remarkable!”  Make sure that your company is setting the tone and the barometer in the marketplace for what you do. This will allow your sales people to confidently and comfortably sell your product or service. Without this, no sales person of any quality can survive and thrive in today’s business environment.  Make sure that your operations team are as committed and passionate about clients as your sales team.

For more information about compensation, HR and or benefits please feel free to contact Jeff Garr, CEO at HR Knowledge or 508-339-1300