Sales compensation isn't something you can afford to take lightly.
In theory, well-compensated sales programs can attract and retain a higher caliber of recruits, while poorly compensated sales teams experience significant turnover. If you're too stingy, it's just a matter of time before your best reps jump ship and start pitching products for the competition.
But sales compensation also has a way of spinning out of control. During the early years of your business, you might have established an aggressive compensation package to improve your recruitment efforts and build your customer base. Now that you're established, sales reps are receiving the same high level of compensation to take orders from existing clients.
When it's time to address a sales force overcompensation problem, tread lightly and apply a handful of common sense practices to bring sales compensation levels back in line.
- Modification clause. A modification clause can be your best friend in decreasing your sales team's compensation package. Although it's too late to include it in your employee agreements, you can create a policy addition to the Employee Handbook, stating that sales compensation plans may be changed without notice – as long as the new policy doesn't violate any other written agreements you have with your sales team.
- Gradual decreases. A sudden change in your sales team's compensation package can be a hard pill to swallow, especially when sales rep have made personal financial decisions based on a longstanding compensation program. Rather than doing it all at once, give advance notice and implement the new compensation model in stages.
- Combined compensation models. If your compensation program is weighted too heavily toward commission or incentive-based compensation, consider switching to a combined base-plus-commission plan. The benefit is that you'll have a better gauge of labor expenses for annual budgeting and your overall costs will decrease.
- Non-cash compensation incentives. There are many ways to compensate sales employees without adding more zeroes to their paychecks. Consider incentivizing your team with equity, prizes, merchandise discounts or even advancement opportunities rather than using cash as the sole motivation for performance.
- Sales team buy-in. No matter how you structure the new compensation plan, you're going to need the buy-in of the entire sales force. Explain why you need to decrease sales compensation and help your workforce see the big picture.