Like most Americans, I spent July 4th in my backyard with family and friends, sharing good food, drinks, and company. At one point, the conversation turned to the purpose of the holiday and our independence from the British crown. Freedom from tyranny was a common refrain, and I couldn’t help but think about something my clients keep telling me about their sales compensation programs. Before implementing their Sales Performance Management (SPM) solution, sales managers felt like they were getting pushed around by their sales reps.
Huh? Employees exerting influence over their superiors? How could this be? How could managers lose control?
Well, sales is a unique business unit in that team members, the people who take care of the nuts and bolts, actually, hold the better hand. The company’s revenue is dependent on sales reps and their ability to sell the organization’s products and services. In fact, it’s not uncommon for some of the highest paid employees at a company being sales reps, low-level employees who are better compensated than many executives when commissions and bonuses are factored in.
The problem is that sales reps know they have the upper hand. Firing a sales rep is fraught with risk. The rep could defect to a competitor or take their clients with them. At the same time, training a replacement is often expensive and time-consuming. As long as quotas are met, even a mediocre salesperson is worth their weight in gold. This allows reps to fall back into some bad habits: coasting at the end of a quarter, pushing products they know best rather than what the company needs them to sell, not bothering with add-ons and service offerings, giving exorbitant discounts just to make a sale.
It got like this because previous compensation management processes didn’t provide managers with the tools to motivate sales reps properly. Excel spreadsheets are manual and labor intensive, sapping time and energy that could go toward improving compensation plans. Homegrown solutions introduce automation into the compensation calculations, but they are typically siloed, missing the agility to tweak plans on the fly to suit the business’s needs.
Modern SPM solutions are the best of both worlds, giving sales managers the control they need to create custom compensation plans and the visibility and agility to tweak them in real time. Suddenly, sales managers could create compensation plans that would affect sales reps’ behavior, using commissions to get them to act in the organization’s best interests.
While sales reps can still be challenging at times and continue to be hard to replace, sales managers can use that against them to align sales to the organization’s priorities and goals. With the right SPM solution and reporting, the way commissions are calculated is transparent, allowing reps to see how a particular deal would affect their take-home pay.
This control frees sales managers from tyranny—tyranny from overzealous, mediocre sales reps who have fallen into some bad habits.
Happy birthday, America!
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Config Consultants is a systems implementer focused on creating Digital Transformations strategies. Our A5 methodology modernizes your lead to cash process and makes your supply chain lean by leveraging industry-leading packaged software, such as Salesforce, Oracle, Apttus, and Anaplan.
By Michael David, Practice Director & Senior Solution Architect at Config Consultants