Aug 12, 2020
Our guest today is Kate Dixon. Kate is the creator of The True Leadership Workshop; True You: Creating Your Personal Brand, Pay UP: Unlocking the Secrets of Salary Negotiation; and Your Best Year Yet: Turbocharge Your Life with the Power of Intention. She helps leaders around the world become both more successful and more fulfilled through coaching, in-person workshops, and online courses where she teaches breakthrough strategies and techniques to accelerate leadership results. Join us as we dive into everything commission, compensation, and negotiation.
When it comes to creating a compensation plan for professionals, we’re looking at how much we need to sell as a company, what level of revenue are we sharing with representatives, and much more. Essentially, most sales plans have a few things in common:
First is “the mix” of base pay vs. commission. This depends on the type of sales. Longer sales cycles may have a higher mix of base pay, whereas shorter sales cycles can lean towards commission. Everything is custom to each organization, but typically it’s based on how much impact the sales rep has on the sale itself. The base pay needs to be big enough to sustain a rep’s necessities, but the commission should be big enough to display recognition. It developing a base pay, many things are considered: the cost of living, the cost of labor, and geographic location. In order to drive the right outcomes, a positive partnership needs to exist between corporate and its sales reps.
Jumping to the opposite side of the spectrum, when creating a compensation plan, most companies have a cap on how much commission you can make, either from an individual sale or in general. It’s all about sharing more of the company with the rep that’s blowing up their numbers. Typically in a sales plan, it’s important to account for a massive sale that a rep may not have played a massive role in. In the same way, there are moments where sales reps impact the sale in a major way. Sometimes deals can fall in your lap, but other times (like in a pandemic) it takes a lot more effort to make those sales.
Sales professionals are turning over at an all-time high. When creating a compensation plan, comparing your commission plan to your competitors is necessary. Your commission plan is your biggest asset in those situations. Retaining salespeople in 2020 is less about long-term wealth-building tools, that doesn’t mean they don’t exist. Stock options and RSU’s are meant to provide a retentive effect.
When crafting a plan, there are a few common mistakes organizations make. The first is not having a great relationship with your finance, HR, and sales leadership. Without those connections, you cannot meet the needs of your salesforce. Additionally, many people overlook some unintended results or consequences of a compensation plan, like losing money every sale.
Tune in next week as we continue this conversation for the perspective of a sales rep negotiating your own plan.
What you’ll learn
In today’s episode, you’ll learn all about compensation versus base pay, generating a compensation plan, and learn how to use that plan to increase retention and boost productivity.