Money is almost a four-letter word in businesses these days. Unless it’s a salary negotiation or the end of the year, it may seem like it hardly ever comes up in your daily thoughts. Ignoring it, though, can cause employees to question their value to the company, and it can ultimately cause your turnover rate to skyrocket, which can cost you more than a raise in compensation.
If you see morale falling or quotas getting increasingly difficult to hit, you may wonder in the back of your mind if you should be raising the compensation structure.
How Incentives Work
If a salesperson is dealing with a stagnant territory, yet their quota remains the same, you can see why they might get frustrated with your expectations and their own experiences. Sales reps likely think about the company’s compensation structure far more than you do, and are already familiar with the nuances that seem to rig the system against them.
According to one study, only 60 percent of sales reps hit their quotas for the year, so the effect is wide-ranging. When you focus solely on their numbers, or solely on how the budget couldn’t possibly accommodate a change for their benefit, your inflexibility could wind up costing the company more than you think. There are a number of studies that show limits placed on commission will limit the efforts of employees. Instead, you may want to consider giving rewards based on sheer effort and force of will. If employees don’t feel they’re being noticed by anyone, they will eventually lose faith in the company’s goals.
There is a danger in becoming too focused on your employees’ personal lives, and employers have to tread carefully when it comes to being too open about topics unrelated to the company. But the fact of the matter is if an employee is too focused on their lack of money, they may wind up looking desperate to clients.
Raising compensation is not about charity or taking on the responsibility of employees’ personal problems. This is about having a comfortable workforce who feel that their needs are being taken care of in the same way that you expect them to take care of the company’s. When you speak with employees, show genuine concern for how they feel about the compensation structure, and then let them know that what they’ve said is being heard and followed up on (and then do it).
If your compensation structure is exceedingly complicated with new reps having to ask questions about every newly acquired account, perhaps it’s time to make things simpler. Not only does a complicated structure confuse fresh hires, but it gives experienced employees opportunities to cheat. Experts suggest that if sales are fairly unstable, your reps should have fixed salaries. This limits the amount of uncertainty your reps are feeling and allows them to budget accordingly.
Commissions typically get implemented because they allow managers to keep track of the work employees are doing, and they do have some merit. However, if you take the time to get to know the character and quirks of your current sales force, you can mitigate the negative effects of making a change.
A Better Way
Compensation and incentives theoretically should be individualized for each salesperson because each worker’s style and attitude is different. No matter the size of your sales force, it’s worth experimenting to find the best compensation structure.