Q: Is there an industry standard base comp for a new account sales rep that is selling technology staffing?  Is it the same for FT staffing services vs. consulting services?

A: In a word-no.  Sales compensation varies greatly by area, previous experience of the candidate and competition in the local market for sales people.  The standard base comp is also affected by the level of incentive comp.  As we saw in the webinar, companies can have a wide range of variance regarding the percentage of pay at risk.  As unscientific as it was, I found that as long as I was regularly talking to sales rep candidates, I could stay pretty close to the market.  And you should be talking to sales rep candidates all the time!

Q: Both the rate-based and quota-based plans seem to be misaligned with the true outcomes we, as business owners, seek.  Shouldn't we incent based on the value to the company (margin, client recognition, credibility in the market, etc.) of the business the salesperson drives?

A: Certainly, we absolutely need to be sure that what we choose to incent is aligned with the goals and strategy we have set for the business.  We should also consider what the sales person can impact.  As the saying goes: “Nothing happens until someone sells something”.  I think I could make a good argument that incenting based upon gross margin dollars in the door is a quite relevant measure for a sales person.  Bringing in high value new clients, it seems, would also be something the rep should accomplish and the management should value.  Creating client recognition and credibility in the market are also critical outcomes for the business.  I am not sure how I would measure and reward a sales person for those outcomes and I believe that those outcomes are a result of the entire organization’s strategy, marketing, execution at the service level and competitive differentiation.  In other words, they are a result of the entire organization’s efforts and the leader’s particularly.  As my Director of Sales always said, sales people tend to be coin operated.  Give them a direction and a straightforward way to measure the financial reward they will earn and the good ones will drive toward the goal.

Q: If you have a plan that is not optimal-how do you change it without losing your people because they are spoiled?  Do you grandfather in those reps and then change the plan for any new people?

A: First, I guess I am not sure how badly I would feel losing people who are spoiled.  As was mentioned several times in the webinar, it is important to distinguish performance management issues from incentive/reward issues.  The best designed incentive or commission plans can only accomplish certain objectives.  They can reward for desired outcomes, they can communicate the sales priorities of senior management and they can further motivate already motivated people.

I have not run across an incentive plan that will motivate unmotivated people, will cause untrained reps to succeed or will cause individuals not suited to sales to be successful.  As you look toward changing your compensation plan, you may also want to review your sales performance management process.  As an example, you might have an incentive program that rewards based upon a percentage of gross margin dollars earned.  You would also have performance measures that would have to be met.  Some of these could be that the sales person must bring in a certain amount of new clients per month, or you may have activity goals for number of sales calls, face-to-face meetings or other activities.  There may be a requirement around the size of a certain number of client, or a targeted amount of onsites.  These goals, of course, would be derived out of the sales plan developed through the Revenue Roadmap process.  I had several sales reps that were making some decent money based upon their existing book of business yet, they still ended up being let go because their activity and new client acquisition results were below the established goals.

In response to your specific question, it is difficult to provide an answer, not knowing what the old and new plans look like.  I would suggest that first; you determine which reps you want to keep.  Then, if the new, desired plan will make it more challenging for the reps to make the same level of income for the same level of effort and results, you may want to phase it in.  For example, if the old plan paid on existing business and the new one did not, you could agree to phase out the existing business at an ongoing reduced percentage for 3-6 months.  This would allow the existing reps to replace the existing business commissions with new business commissions.  If you have determined that the old plan is not optimal, I would suggest that you design a transition that gets everyone off that plan, rather than grandfather them.  You can always do something special for a high performing rep that might go beyond what you would be willing to do for an average one.

Q: If a selling Branch Manager is compensated for his selling, how do you make the transistion where they are just managing and there is no incentive?

A: We spoke to this question briefly in the webinar.  I can’t imagine any significant position in a staffing company that does not have some form of incentive.  It might change from a “commission” type plan to an objectives based plan, or a combination but no incentive for a Branch Manager doesn’t sound like a very good idea.

Before the incentive program can be designed, of course, the role, purpose and responsibilities of the position need to be defined.  Do sales reps report to this position?  Is the Branch Manager responsible for profits for the branch?  Does the Branch Manager have specific goals associated with the operation of the branch?

It may be that, in order to keep the Branch Manager whole, financially, that they may need a combination of a higher salary, an override on sales rep commissions and/or an objectives-based incentive plan.  If the selling Branch Manager was earning a significant amount of income through the commission side of income, it may be that the individual will have to make a decision about the direction of their career.  If they want to rise through management, they can typically end up earning more than most sales reps.  They usually have a lower percentage of their pay at risk and sales people sometimes want to move on to other roles.  The one point I would re-emphasize is that I do not think that Branch Managers should be without some of their pay being at risk and tied to the growth and success of the branch.

Q: Are there any stats that can give some insight on how to compensate sales people on new vs. retained business?

A: I do not have statistics on this other than to say that many companies pay on existing as well as new business and many do not.  Again, the beginning point is the role and purpose of the position and the underlying strategy of the business.  For my company, as an example, one of our Guiding Principles was that we were going to obtain 100% market share of any company we did business with.  Once we were able to get our foot in the door of key major client opportunities, I not only paid commissions for the new business, but I also had performance measurement incentives around increasing market share of those existing clients.  I think it is safe to say that if you have any expectations for the sales rep to do anything related to existing business, you will likely have to reward for it.  Otherwise, the rep won’t spend time on non-commissioned activities. 

One of the co-founders of People 2.0, Chuck Miller, really wanted his sales people to focus on new business in the staffing firm he owned.  He was involved almost exclusively in large onsite business.  He felt that the onsite staff and branch service team should be the ones to maintain and retain this business.  Therefore, he did not pay commissions to any sales rep for growth within any existing business.  New business was defined as clients, brought in by the sales rep and the business from the client remained “new” for 12 months after which, commissions stopped.   My approach or Chuck’s were perfectly valid because they supported the strategy of our companies but if I had adopted Chuck’s incentive plan for my strategy, I would have had some confused sales reps.

I hope the take away from this series of webinars is that that success in your business is derived from the strategy, mission and particular solution your company chooses to pursue.  Mark Donnolo’s Revenue Roadmap is just that: a roadmap for defining all aspects of the sales effort in a hierarchy where each decision affects the next.  Compensation plays a critical part in directing sales people in the right direction, motivating and rewarding them.  However, the compensation plan is a result of all the other elements in the Revenue Roadmap.  The plan should be developed once the rest of the Roadmap has been defined.