Latest / Sales Trajectory Podcast / Compensation & Incentives: Are You Paying for Growth or Just Paying More?

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Compensation & Incentives: Are You Paying for Growth or Just Paying More? · Sales Trajectory Podcast

0:22
SPEAKER_00: Welcome to the Sales Trajectory Podcast, where innovation meets execution in sales.
0:28
SPEAKER_00: I'm Jason Howes, your host, a thirty-five-year sales veteran and lifelong student of the game.
0:35
SPEAKER_00: This podcast is for leaders and sales professionals with a growth mindset.
0:40
SPEAKER_00: You'll hear real sales stories about new products, motivating teams to prospect, and boost productivity.
0:47
SPEAKER_00: We dive deep into sales process, cutting-edge tech, and recruiting top sales performers.
0:54
SPEAKER_00: Let's get started.
1:01
SPEAKER_00: Right now, I wanted to talk a little bit about what's been happening in my world to share a few stories, a few updates.
1:08
SPEAKER_00: It's no surprises that most sales professionals are under the pump.
1:12
SPEAKER_00: There's a lot of pressure on at the moment.
1:13
SPEAKER_00: There's a lot of moving parts in the economy in Australia.
1:17
SPEAKER_00: As a business owner and a fellow sales professional, we feel the impact of what's happening in the market at the moment.
1:24
SPEAKER_00: Sales have stalled, costs have increased, new government regulations on paying super faster, ATO being very active chasing up taxes.
1:34
SPEAKER_00: A lot of companies are finding the same things.
1:36
SPEAKER_00: Look, there are some fortunate ones who have grown during the tough times.
1:40
SPEAKER_00: And again, that's a reflection on the investment they've made to their business, their people, their systems, and their processes to be able to move through that.
1:49
SPEAKER_00: It's a two-speed economy at the moment.
1:51
SPEAKER_00: If you're in Southeast Queensland, the market is booming.
1:55
SPEAKER_00: We've got the Olympic Games coming, but it's also starting to tighten up again with everything that's happening in real estate.
2:01
SPEAKER_00: The dynamics of the market is feeling the pinch.
2:04
SPEAKER_00: As a business owner for over seven years now, we're constantly being pressured and pushing for best practice.
2:12
SPEAKER_00: I think again that the day you take your foot off the pedal, try and be the best version that you can be is really important.
2:20
SPEAKER_00: We're right in the middle of finals football at the moment, which I absolutely love, and there's been some amazing games on the weekend.
2:27
SPEAKER_00: But again, if you're not fit for finals, you won't be on the team.
2:32
SPEAKER_00: I think it's a real valuable lesson for leaders and salespeople to realize themselves that if you're not trained and skilled, if your strategy is not aligned, if your team aren't motivated, holding you back from greater sales success or building that high performance sales culture, now's the time where you're going to see people sitting on the bench because they're frustrated, they don't know what to do.
2:58
SPEAKER_00: Again, I've always said this that you can only train and coach salespeople to the ability that you were trained and coached.
3:06
SPEAKER_00: So if you've got a new sales manager, or if you've got somebody managing the sales team on the side of another position, which is quite common at the moment, we're finding a lot of leaders are wearing multiple hats in the business.
3:18
SPEAKER_00: A lot of companies don't have a sales manager, so it could be a site manager or a branch manager or the CEO or the owner who effectively is managing or expected to manage the sales team.
3:32
SPEAKER_00: And if that's that's happening in your business right now, well then these are the times when you start to feel the pinch because this is when everything becomes a push.
3:42
SPEAKER_00: This is when you realize that potentially you've hired the wrong type of salesperson for the role, or you've spread your team too far amongst certain territories.
3:54
SPEAKER_00: I just wanted to fill you in a little bit about where we're at at the moment.
3:57
SPEAKER_00: We're facing the same challenges.
3:59
SPEAKER_00: We're pushing for best practice, we're working on some new training programs, which is exciting, and we'll be able to share those with you soon.
4:08
SPEAKER_00: The topic of today's episode is compensation and incentives.
4:13
SPEAKER_00: And are you paying for growth or just paying more?
4:17
SPEAKER_00: This is a reflection back to chapter four of Crystal Ball recruiting.
4:23
SPEAKER_00: If you think this is going to be a discussion about salary surveys, commission percentages, and remuneration benchmarks, that's not where I'm going.
4:32
SPEAKER_00: What I want to talk about is something that I see every day, and that is businesses are spending more than ever to recruit salespeople.
4:40
SPEAKER_00: They're paying for industry experience, whether it's headhunting someone from the competition or whether it's hiring somebody that's been in the industry for a long time.
4:49
SPEAKER_00: Businesses are spending more than ever on salespeople.
4:53
SPEAKER_00: Many companies have increased salaries over the last few years.
4:57
SPEAKER_00: Some have invested in incentive schemes.
5:00
SPEAKER_00: Some have hired experienced sales professionals from competitors, and yet they're still frustrated.
5:06
SPEAKER_00: Growth isn't where they expected it to be.
5:08
SPEAKER_00: Market share isn't increasing.
5:10
SPEAKER_00: Margins are under pressure.
5:12
SPEAKER_00: Customer acquisition is harder.
5:15
SPEAKER_00: It's a rare event where someone comes in and they won a major account.
5:19
SPEAKER_00: Meanwhile, on the flip side, many salespeople are equally frustrated.
5:24
SPEAKER_00: Targets are getting harder to achieve.
5:27
SPEAKER_00: Customers are taking longer to make decisions.
5:30
SPEAKER_00: Competition has increased, and many are questioning whether compensation plans actually reflect what they're being asked to do.
5:39
SPEAKER_00: So today I want to explore a simple question.
5:42
SPEAKER_00: Are you paying for growth or are you simply paying more?
5:47
SPEAKER_00: Why compensation matters more than most leaders think?
5:51
SPEAKER_00: Over the years, I've learned that compensation isn't really about just money.
5:55
SPEAKER_00: It's about behavior.
5:57
SPEAKER_00: Every compensation plan sends a message.
6:00
SPEAKER_00: The question is, what message is your business sending?
6:03
SPEAKER_00: If you reward revenue, people focus on revenue.
6:07
SPEAKER_00: If you reward margin, people focus on margin.
6:10
SPEAKER_00: If you reward new business, people focus on new business.
6:15
SPEAKER_00: If you reward account retention, people focus on retention.
6:21
SPEAKER_00: The challenge is that many compensation plans were created years ago by somebody that was never trained how to do it.
6:30
SPEAKER_00: Maybe you're expanding the business at that time.
6:33
SPEAKER_00: Maybe you were launching new products.
6:35
SPEAKER_00: Maybe it was about your team for different reasons, whether it was a profit share on the overall company results.
6:42
SPEAKER_00: The challenge is that many compensation plans were created years ago.
6:47
SPEAKER_00: The business strategy has changed.
6:49
SPEAKER_00: The market's changed.
6:50
SPEAKER_00: The role of sales has actually changed.
6:53
SPEAKER_00: But many are too scared to change the model.
6:56
SPEAKER_00: It's never really evolved.
6:59
SPEAKER_00: Not every business wants the same outcome.
7:02
SPEAKER_00: We see that when we're working with our clients.
7:04
SPEAKER_00: Some companies need aggressive market share growth.
7:07
SPEAKER_00: Others need profitability.
7:09
SPEAKER_00: Others need customer retention.
7:12
SPEAKER_00: Or others need more from their existing accounts.
7:16
SPEAKER_00: Some simply need to stop losing good customers.
7:19
SPEAKER_00: Everybody's situation is different.
7:22
SPEAKER_00: And if you're a national company, vary by state, by team.
7:26
SPEAKER_00: Before you build an incentive plan, you need to know exactly what success looks like.
7:33
SPEAKER_00: Best practice for incentive plans is that they should be an appendix to the actual contract because things can change.
7:41
SPEAKER_00: They're not a set and forget.
7:43
SPEAKER_00: If your compensation plan isn't aligned with the direction of the business, you're effectively paying people to head in the wrong direction.
7:52
SPEAKER_00: One of the biggest conversations we're having right now is how companies have paid a premium for experience.
8:00
SPEAKER_00: And I understand why.
8:01
SPEAKER_00: When the market becomes more competitive, the temptation is to buy experience.
8:07
SPEAKER_00: Let's hire someone who's been in our industry for 20 years.
8:10
SPEAKER_00: Let's bring someone across from a competitor.
8:13
SPEAKER_00: They must be able to win a new business.
8:16
SPEAKER_00: They should be able to bring over new clients.
8:19
SPEAKER_00: Let's pay more and buy proven results.
8:23
SPEAKER_00: The challenge is that industry and performance aren't the same thing.
8:27
SPEAKER_00: I've seen businesses pay top dollar for industry experience and not get the results they expected because they bought experience without understanding what created success.
8:38
SPEAKER_00: Was it the market?
8:40
SPEAKER_00: Was it the existing customer base for this salesperson?
8:43
SPEAKER_00: Was it the strength of the brand?
8:45
SPEAKER_00: Was it the product availability?
8:47
SPEAKER_00: Or was it the quality of the product?
8:50
SPEAKER_00: Those are very different things.
8:52
SPEAKER_00: In strong markets, lots of people can look successful.
8:56
SPEAKER_00: When conditions become more competitive, capability becomes far more important.
9:02
SPEAKER_00: That's when prospecting matters.
9:04
SPEAKER_00: That's when sales process matters.
9:07
SPEAKER_00: That's when qualification matters.
9:10
SPEAKER_00: And that's when the ability to create new opportunities becomes critical.
9:14
SPEAKER_00: And one of the lessons I've learned is this experience has value, but experience without the ability to create growth becomes very expensive.
9:25
SPEAKER_00: What happens when incentive plans go wrong?
9:28
SPEAKER_00: A new compensation plan gets introduced.
9:31
SPEAKER_00: Everyone has good intentions.
9:33
SPEAKER_00: The executive team want growth, want a fair level playing field.
9:38
SPEAKER_00: Finance want predictability.
9:40
SPEAKER_00: And just remember, all these areas within a business tend to be remunerated on the results of the overall company.
9:50
SPEAKER_00: So everyone, some sometimes everybody's looking at it from their own perspective.
9:55
SPEAKER_00: Problem is that sometimes the people designing the plan have never managed a sales territory.
10:02
SPEAKER_00: They've never actually had to win a deal.
10:04
SPEAKER_00: They've never had to open a new account and lose sleep over monthly sales targets.
10:11
SPEAKER_00: So they're building something that looks really good in the boardroom, then it gets released to the field, typically without discussion with the salespeople, what I call a forced event where it's the old bulldozer.
10:24
SPEAKER_00: It's like you just keep moving Earth forward based on the theory that there is no choice here.
10:31
SPEAKER_00: This is the way we're building this new system and this new uh incentive program.
10:36
SPEAKER_00: So it's really important to sit back and think about it from the salesperson's point of view.
10:42
SPEAKER_00: It's a very challenging situation to build incentive plans if you don't have a very strong understanding or what I call committee of people who can look at it across the board.
10:56
SPEAKER_00: We build sales compensation plans most weeks.
10:59
SPEAKER_00: We look at new ways to do that.
11:01
SPEAKER_00: There's an allocated chapter in Crystal Ball Recruiting on incentives and compensation plans.
11:08
SPEAKER_00: It's so critical to make sure that A, you're paying enough, but B, you're not overpaying.
11:15
SPEAKER_00: Businesses need a return on investment for their salespeople.
11:19
SPEAKER_00: They should be able to pay their way.
11:22
SPEAKER_00: They should be able to be rewarded for new business development or whatever it is that's aligned to your strategic plan this year to grow.
11:32
SPEAKER_00: If your new plan gets released to the sales team and it completely misses the mark, I've seen plans that were too complicated.
11:41
SPEAKER_00: And again, plans with too many variables, plans where salespeople couldn't calculate what they could potentially earn.
11:49
SPEAKER_00: Plans that rewarded activity instead of results.
11:53
SPEAKER_00: And the biggest lesson here is a compensation plan should never be built in isolation.
11:59
SPEAKER_00: Sales leadership must be involved.
12:01
SPEAKER_00: The people doing the role must be understood.
12:05
SPEAKER_00: And above all else, the incentives must support the strategy of the business.
12:10
SPEAKER_00: If they don't, you're creating confusion, and confused salespeople rarely produce consistent results.
12:19
SPEAKER_00: We're moving towards the end of the first quarter for the year.
12:23
SPEAKER_00: I know there's a lot of sales or salespeople out there right now that are potentially hung up the hat because they've had a poor first quarter and they realize that potentially the sales are dropping, the volumes are dropping, the price of the product is dropping.
12:41
SPEAKER_00: Again, the gap gets further and further behind.
12:45
SPEAKER_00: That's why you need to make sure that your plan is suitable for market conditions, can be changed or adjusted accordingly if required, but it also has to be focused on more than just sales.
13:00
SPEAKER_00: If you're focusing on just sales, then you're removing really good opportunities for levers that can trigger salespeople to do the right activities at the right frequency with the right types of clients and be rewarded for things that they're doing to tick off the boxes.
13:19
SPEAKER_00: I don't agree with all compensation just on sales.
13:22
SPEAKER_00: I personally don't agree with it being just on margin as well.
13:26
SPEAKER_00: But again, every company is different.
13:29
SPEAKER_00: And if you've never built a sales compensation plan before, which a lot of people haven't, well, that's where you need to reach out for help.
13:37
SPEAKER_00: Don't rely on AI or Googling it or staying with what the person 10 years ago set up for you because you've been too worried to change it.
13:46
SPEAKER_00: You need to have the difficult conversations.
13:49
SPEAKER_00: Is this working?
13:51
SPEAKER_00: And as I've always said, if you're here now and you're nearly at the end of the first quarter, if you're not paying commissions or incentives, then something is wrong.
14:02
SPEAKER_00: Not every salesperson is motivated by the same thing.
14:05
SPEAKER_00: I had no idea of this when I managed a sales team.
14:08
SPEAKER_00: I always used to sit there and go, why are some people really motivated and chase the comms?
14:13
SPEAKER_00: Other people just show no interest at all.
14:15
SPEAKER_00: My challenge was the people that showed no interest at all, they were our biggest territories that were struggling.
14:21
SPEAKER_00: And it's simply not true.
14:23
SPEAKER_00: I've seen it throughout my career.
14:25
SPEAKER_00: At certain stages of my life, money was incredibly important.
14:29
SPEAKER_00: It is now.
14:30
SPEAKER_00: But for a lot of people, you know, it may not be.
14:33
SPEAKER_00: When I was younger, buying a home or starting a family or building a future, additional income was a major at different stages of life.
14:42
SPEAKER_00: Other things become more important.
14:44
SPEAKER_00: You hear this every day.
14:46
SPEAKER_00: I prefer flexibility.
14:47
SPEAKER_00: I prefer recognition, being part of a team that succeeds.
14:52
SPEAKER_00: You know, I'm here for leadership long-term opportunities within the business.
14:56
SPEAKER_00: I love the autonomy.
14:57
SPEAKER_00: I'm here because I get personal development.
14:59
SPEAKER_00: Some people are here because they love the work-life balance or purpose.
15:03
SPEAKER_00: The mistake many leaders make is assuming that every salesperson is wired the same way.
15:09
SPEAKER_00: They're not.
15:10
SPEAKER_00: Now, that doesn't mean compensation isn't important.
15:13
SPEAKER_00: It absolutely is.
15:14
SPEAKER_00: But effective incentive programs recognize that motivation is different for different people.
15:20
SPEAKER_00: That's why understanding a sales team matters so much.
15:24
SPEAKER_00: Not just their sales numbers, but their goals, their ambition, their drivers.
15:28
SPEAKER_00: Because if you don't understand what's important to your people, eventually maybe your competitor will.
15:34
SPEAKER_00: And that's why I used to love spending windscreen time with our sales guys.
15:38
SPEAKER_00: I learned what was happening in their life.
15:40
SPEAKER_00: I learned what their family were doing.
15:42
SPEAKER_00: I showed and I cared for their best interests.
15:45
SPEAKER_00: And I think if you're sitting in an office as a sales leader and you're not out there being with your team and understanding what's happening in their life, well, it's very difficult to be able to motivate them to be able to get you the results that you need.
15:59
SPEAKER_00: And we see that a lot right now, that the business urgently needs sales growth and new clients.
16:06
SPEAKER_00: But the sales people looking after the territory, maybe they're okay.
16:10
SPEAKER_00: They're enjoying their work-life balance.
16:12
SPEAKER_00: They're enjoying the job.
16:14
SPEAKER_00: There's not a lot of pressure.
16:15
SPEAKER_00: They're not compensated for sales growth because the company head office dictates where the volumes go and all that sort of stuff.
16:23
SPEAKER_00: So the three questions every business should ask is if you're now reviewing your compensation and incentive structure, I'd start with three simple questions.
16:32
SPEAKER_00: Question one, what behavior are we trying to drive?
16:36
SPEAKER_00: Not revenue, behavior.
16:38
SPEAKER_00: What specifically do we need our team to do?
16:41
SPEAKER_00: Is it more prospecting?
16:43
SPEAKER_00: Is it to win new accounts?
16:44
SPEAKER_00: Is it to sell on value and get higher margins?
16:48
SPEAKER_00: Is it to improve retention of clients?
16:50
SPEAKER_00: Or is it trying to increase market share?
16:54
SPEAKER_00: But you need to be clear.
16:55
SPEAKER_00: Question two, does this support our business strategy?
16:59
SPEAKER_00: Because not all growth is equal.
17:01
SPEAKER_00: A mature business has different needs to a business that is in an aggressive expansion mode.
17:07
SPEAKER_00: An incentive plan should reflect reality, not wishful thinking.
17:11
SPEAKER_00: Question three, can the salesperson clearly see how they win?
17:15
SPEAKER_00: Can they explain what they are measured on, what success looks like, how they earn incentives, and how much they can potentially earn?
17:25
SPEAKER_00: An incentive plan should have key triggers that you want to pull in the business.
17:31
SPEAKER_00: You should be able to write a few notes on the back of a drink coaster.
17:36
SPEAKER_00: You should be able to explain it within two or three simple points as to how they can earn more money.
17:43
SPEAKER_00: And again, simple is powerful and it drives focus.
17:48
SPEAKER_00: Simple drives behavior.
17:50
SPEAKER_00: I'll leave you with one final thought.
17:52
SPEAKER_00: Compensation doesn't create great salespeople.
17:56
SPEAKER_00: It doesn't replace training.
17:58
SPEAKER_00: It doesn't replace leadership and it doesn't replace coaching.
18:02
SPEAKER_00: And it certainly doesn't replace a growth mindset.
18:06
SPEAKER_00: But compensation does reinforce behavior.
18:09
SPEAKER_00: It tells your team what matters.
18:11
SPEAKER_00: It tells your team where to focus.
18:14
SPEAKER_00: It tells them what success looks like.
18:16
SPEAKER_00: And if the businesses that get this right understand something very important.
18:22
SPEAKER_00: Growth doesn't come from compensation alone.
18:25
SPEAKER_00: Growth comes from having the right people, the right leadership operating in the right environment with incentives aligned to the outcomes a business is trying to achieve.
18:36
SPEAKER_00: When those things come together, compensation becomes a powerful growth tool.
18:41
SPEAKER_00: When they're out of alignment, compensation simply becomes another cost.
18:46
SPEAKER_00: So here's my question for you to finish up today's episode.
18:50
SPEAKER_00: If I reviewed your compensation plan today, would it tell me exactly where your business is trying to go?
18:57
SPEAKER_00: Because if the answer's no, it might be time to rethink what you're really rewarding for.
19:04
SPEAKER_00: Got a product that's struggling or launching something new?
19:07
SPEAKER_00: Reach out, we're inviting guests who want to make a real impact.