Thoughts on Sales Management Compensation


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Should sales managers be compensated based on the performance of their team? According to over 1700 respondents to CSO Insight’s Sales Management Optimization 2013 Key Trends Survey, the majority believes so. I also support the majority’s position. Unfortunately, I don’t necessarily support what parts of the sales team’s performance the majority of organizations compensate managers.

Of those people and companies surveyed, 62.6% of sales managers were measured and compensated on their team’s attainment of quota. 51.8% were compensated for the individual quota attainment for each rep. 28.5% on their reps maintaining margins.

I would argue, and strongly, quota attainment, sales and margins aren’t the only metrics that should be used for compensating sales managers. Certainly they are the most obvious, but I submit there are other, far less obvious metrics that could ultimately have a greater impact on sales production.

You see, as the report also references, there is a well-known adage that states an organization elicits the performance it rewards. I think it is better stated for managers as, “an organization elicits the behaviors it rewards.”

So what is it that sales managers really manage? Well, it certainly isn’t sales. If you read my last blog, I stated that sales couldn’t be managed. Sales are the output of a process. Output can’t be managed. Quota attainment, sales, and margins can’t be managed.

If companies want better results, their salespeople and sales managers can’t continue to do the same things in the same ways they’ve always done. If they do, the results won’t change. Greater results are the byproduct of changing the behaviors of the people responsible for producing them, which leads me to another interesting finding in the survey.

Get this. Of the companies surveyed, only 9.6% of the respondents work for organizations where sales managers were compensated based on whether or not members of their team adopted the company’s sales process. Only 8.5% work for organizations that rewarded sales managers who proactively identified who on their team needs help.

Hello??? The majority of organizations surveyed are compensating managers for numbers, output, things that can’t be managed! Only a handful of progressive, forward thinking organizations are compensating based of things that are focused on changing the behavior of their people.

I’m not suggesting that sales process adoption and proactive coaching are the only two behavioral performance metrics a company could employ for compensation. I am, though, suggesting organizations have to think differently about sales management compensation.

Switch gears, folks. Think about changing the behaviors that produce results. You can continue to compensate on sales and margins, but consider what actions and behaviors are required by your managers and their teams to achieve greater production. Build a well-rounded sales management compensation program that incents people for things that can truly be managed.

Republished with author's permission from original post.

Bob Nicols
Bob Nicols serves as Founder and CEO of AXIOM. He has 34 years of experience in sales, sales management, executive management and sales force development. He has managed and mentored thousands of sales people, sales managers and senior managers and been responsible for hundreds of millions of dollars in sales. For more than 21 years he has developed and delivered sales programs that have become the standard for many Fortune 100 companies including AT&T, BellSouth, Disney Enterprises, Alltel, Verizon and ESPN.


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