Good salespeople are competitive. No matter how well they did yesterday, they want to do better today and still better tomorrow. The same applies to their compensation system. It must be competitive with the various compensation systems offered on the job market. Furthermore, it must reward growth, not punish growth. There is no such thing as doing “too good” in sales with the right system in place. This is probably the single most glaring difference companies have that successfully attract good salespeople versus the ones that are struggling with sales force turnover. Unsuccessful companies implement restrictive and punitive compensation systems- they punish success by cutting territories, raising the bogey to achieve bonus, or creating “house” accounts.

So, what works? What’s the formula? Realistically, there isn’t a formula. As much as the companies mentioned previously have great sales teams that earned substantive payouts for their efforts, every one of them has different size territories, different commission structures, different sales cycles, different products and markets, and a different approach to the market.

If you put ten successful sales executives in a room and ask them to detail their sales compensation systems, each one would be different. However, the common elements of these systems would be:

• They hire the right kind of people that can work in a performance-based pay system.
• They hire salespeople who are business-savvy. They know how to bring in profitable deals (not just revenue) and manage the differences between local and corporate strategy to mutually beneficial outcomes.
• Everyone has to stretch, but whatever they are stretching for is reachable.
• Success is not only rewarded, it is never taken for granted by either the sales force or the company.

Given these criteria, however, it is not that simple. You don’t solve a problem merely by throwing money at it. There are a few more details that need to happen in order to make this work- like corporate behavior and sales behavior.

Corporate Behavior:

The corporate behavior must be such that it embraces the sales function as a constantly challenging, in-the-line-of-fire profession that few do well and for good reason: it’s very hard to do.

The other aspect of corporate behavior that’s critical to the success of performance-based pay is to understand that the pay does not drive sales behavior or results. This is a bad management assumption- that commission will force people to go out and sell. It is equally bad to assume that big checks mean happy salespeople. Successful salespeople still need to be managed and they still need to be stroked.

Salesperson Behavior:

On the sales side of the equation, while salespeople should be able to earn more than the person signing their check, they also need to always resect the signature at the bottom of that check. The tail should not wag the dog, and in the case of a belligerent, obnoxious, arrogant salesperson, the tail should be removed, no matter how big it is.

Successful Sales Compensation packages are as varied as the companies that administer them and markets they serve. Although a perfect package does not exist, there are those that are very successful. They reward the right types of sales behavior and back it up with the right corporate behavior. These packages also elevate the sales where it deservedly belongs among the organization charts in all businesses: as a respected, well-paid profession.