Sales compensation is a sensitive topic for many.

When it comes to money, things get tricky.

Yet it’s critical to bring themes, such as an effective sales compensation plan determining the success of your business, into discussion.

So, how to figure out…

Are we paying our reps too much? Are we paying them too little? Are we encouraging the right behaviors?

To shed light on this important topic, we are joined by Reese Bacon, Director of Sales Effectiveness Practice at Buck. Reese has nearly three decades of expertise in sales effectiveness and compensation. In his current role, he works with clients to identify and remove obstacles in the path of their success.

What Is Sales Effectiveness?

Sales effectiveness is a multifaceted concept. Gather five or ten people, and you’ll likely hear as many definitions. Reese perceives it as assisting a sales leader or the CEO in optimizing the potential of their sales team. In essence, it’s about maximizing value, which is actually subjectively defined by each client and CEO.

Even businesses within the same industry possess distinct characteristics, ensuring that no two experiences are identical. While there are recurring patterns observed over time, each company is defined by its unique culture, philosophy, strategy, processes, and systems.

“Sales effectiveness is helping the sales leader extract the most value out of the sales organization to the benefit of either the shareholders or the stakeholders”.

Reese Bacon, Director of Sales Effectiveness Practice at Buck

Modern Talent Challenges

A primary challenge for revenue teams is talent acquisition and retention. It’s not just about hiring the right people, but also ensuring they stay. Retention factors extend beyond salary; they include a supportive boss and positive colleague relationships. The younger workforce, in particular, values a company’s mission over profit. Their life goals also differ from previous generations; they highlight experiences and often challenge traditional norms around family and work. In essence, to drive revenue, understanding and addressing the evolving needs of the workforce is a must.

Redefining Sales Compensation

An effective compensation plan is crucial for motivating a sales team. Salespeople need fair opportunities aligned with market dynamics. In a limited market, they might feel stifled, while in a saturated one, overwhelmed. The key is to balance earning potential with workload.

Salespeople should be enthusiastic about what they sell, ensuring its market acceptance. Compensation should be competitive, with added bonuses like flexibility or hybrid work options for better motivation. From the employer’s viewpoint, they must adapt compensation to attract the right talent, given their product and market realities. If products don’t resonate with the market, it’s time to reevaluate.

Beyond monetary incentives, today’s salespeople value representing a brand’s ethos and authentic buyer interactions. Compensation plans should foster these behaviors, moving away from the dated “coin-operated” view of sales reps.

“I’m not suggesting that it works everywhere, but it can work in a lot of places that it’s not working now. And maybe certain industries are better than others, and certain jobs are better than others. But I don’t want to discount it. It’s like if it works, use it. If it doesn’t, don’t use it. But I want it as an alternative. I want it as something to think about”.

Reese Bacon, Director of Sales Effectiveness Practice at Buck

Aligning Compensation to Business Goals

Many companies rely too heavily on their compensation plans for management, overseeing active leadership. This approach can be problematic, especially when using a top-down goal-setting process. Assigning the same sales targets across varied regions can lead to disparities due to different market opportunities.

A more effective strategy combines top-down and bottom-up goal setting:

1. Sales reps provide insights from their local markets;
2. This feedback is cross-referenced with overarching corporate objectives;
3. Collaborative discussions lead to realistic, balanced goals.

Involving sales reps in the process is key; their on-the-ground knowledge ensures goals are both challenging and attainable. The end goal goes down to a fair compensation structure that motivates employees and drives business success.

“And that’s actually what I help a client manage so that they can set reasonable goals to keep people roughly equal for equal opportunity and for equal effort. You don’t want people working too hard, you don’t want them fluffing off, and you want them to earn fairly”.

Reese Bacon, Director of Sales Effectiveness Practice at Buck

Now that you have learned how to design and set up an effective sales compensation plan for your organization, check out the full list of episodes: The B2B Revenue Executive Experience and instructions on how to rate and review the show are here.