Did you know the average sales manager hopes to grow revenue by 6% this year? And, about 57% of sales managers believe they can make their goal in 2019. That plan could be challenging for some managers, especially those who experience more than the median projected sales rep turnover rate of 10%. These statistics are contained in the 2019 Sale Compensation Trends Survey produced by AGI.
To reach their sales goal, sales managers should review their compensation system. In the AGI survey, over 70% of managers say their reps can expect to earn 3% more than last year. That setup might demotivate reps who know what the company’s overall growth target is. Research shows that when a company is doing well financially, employees expect to get their fair share of the earnings pie.
Sales managers might want to find a way to structure compensation to give reps the chance to boost their earnings. Almost 25% of sales managers say their organizations have built that possibility into target incentives. Further, most organizations don’t cap the amount of money a sales rep can earn.
Remember clawbacks? Erik Charles does, and he calls clawbacks, “one of the fastest ways to destroy trust on your sales team, slow down deal flow, increase turnover among top reps.” Yet, over 58% of sales organizations use them. Some managers believe the threat of a clawback forces reps to make sure they’re selling to a qualified and eager prospect.
The truth is, not every prospect is upfront about why they are signing a contract with you. Do you really want to penalize your rep for a client’s bad behavior? No rep likes the idea of having to give back money that they’ve already deposited into their bank account. One negative experience like that can demoralize your reps. Instead of selling, they'll spend time thinking about how much they’re actually going to earn this year and if they can get a better deal somewhere else. Do a better job of structuring your compensation plan and your sales contracts and you won't need to use clawbacks.
Improved Compensation and Incentive Tools
In the AGI survey, over 70% of organizations allow for special incentives when reps start selling a new product. This makes sense. The reps have to learn how to sell the product. They might have to develop a new list prospects. All of this effort takes time.
It turns out only about 25% of organizations give reps additional incentives for bringing in new versus renewing business from existing clients. If that's the case in your organization, you may want to think about the incentive structure you’re using and how well it matches the goals that your reps are reaching for.
Then there are the non-financial incentives. We all know that younger employees want something a little different in their workplaces. To date, about 25% of companies have adjusted their work policies to accommodate the expectations of younger sales reps. These changes include team-based selling, more feedback from managers and the ability to work from home.
To help your team successfully finish 2019 and to plan for the coming year, review your compensation and incentive plans. Keep them simple and achievable and try to accommodate the needs and expectations of the full range of your sales reps.