With companies spending up to 10% of their revenue or more on sales compensation, CEOs are bound to ask their sales compensation leaders to demonstrate a sufficient return on investment, and when it happens to you, you better have an answer. A boost in sales revenue compared to the dollars spent is the most common measurement of sales comp ROI, but should that be the only one?
For instance, consider the sales comp plan’s impacts on the sales force. An increase in sales isn’t an accurate measure of a comp plan’s success unto itself, especially if it depletes the sales force or encourages reps’ bad behaviors to make those numbers.
Or what about how the plan supports, or doesn’t support, a company’s guiding principles? Companies usually have eight to 12 principles that they establish to determine whether a sales comp plan is effective, and only one or two of the principles typically are focused solely on sales results. And what about the harder-to-measure aspects of a product’s performance, like market positioning and brand value proposition?
To more holistically and accurately assess the ROI of your sales comp plan, look beyond revenue growth and consider adding these three metrics to your mix:
1. Attraction: An effective sales compensation plan will help your company attract top talent, so take a look at your hiring and retention performance. Are you unable to pull in the best salespeople because of the design of your sales comp plan? What impact does that have on your sales results?
2. Motivation: Your sales comp plan also should effectively motivate sales reps, of course. You can track the plan’s effect on reps’ motivation by assessing overall sales results and fielding regular sales force surveys, tracking the survey results over time. Segment the results to see if the motivation value varies across groups. For example, is the plan equally motivating for baby boomers and millennials? Also, diagnosing and correcting any biases in favor of one segment of the sales force over another is critical. Think about how the reps who cover your biggest or highest-market-share territories are feeling.
3. Retention: If your sales compensation plan is working, it should be helping you retain top talent at the company. How is rep turnover trending overall? What about top performers vs. bottom performers?
Create an open dialogue with the sales force to help address any perceived fairness concerns, which can be detrimental to morale. Conducting “myth-buster” sessions to address field concerns and dispel myths is an effective tactic. The more sales reps feel that their voices are being heard, the more they’ll be engaged in the sales comp plan. If they believe that they’re being measured fairly and rewarded for their performance, they’ll be more motivated and more likely to stay with the company.
A talented sales force that’s well-coached and armed with compelling value statements can drive sales revenue growth, and a good sales compensation plan can motivate them to do so year after year. Measuring sales revenue growth in combination with an increase in attraction, motivation and retention rates, and routinely checking the health of the sales compensation plan, will help you understand if you’re getting the most out of your comp plan—and will arm you with the necessary data to prove to your CEO that the investment in sales compensation is worth it.
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