Jim Peduto Headshot

H.L. Mencken famously said: "For every complex problem, there is an answer that is clear, simple, and wrong." I'm not sure he was talking about sales compensation, but he may as well have been. 

When sales performance falls short, the knee-jerk reaction for many leaders is to overhaul the sales compensation plan. Before you solve a complex problem with a simple solution, let's delve into why this might not be the silver bullet solution you're hoping for.  

Rethinking Sales Compensation 

Many leaders believe that altering compensation plans will rejuvenate their sales team and drive them to win new business. However, history shows that this approach often falls short. The failure lies in the assumption that financial incentives are the primary motivator for salespeople. 

The new reality is that most salespeople are not motivated by money. Over the years, the percentage of salespeople motivated by money has declined dramatically to just 17 percent. The majority are intrinsically motivated — they find fulfillment in mastering their craft, enjoying their work, and contributing to a larger purpose.  

This insight is vital: tweaking compensation plans only works with money-motivated sellers. Coaching and growth opportunities, not just monetary rewards, motivate the other 83 percent.  

A more effective approach is to analyze the underlying causes of lagging sales performance. These often revolve around three areas: 

1. Talent: Salespeople's effectiveness is closely tied to their suitability for the role. Hiring and onboarding processes that fail to identify candidates with the right commitment and sales DNA can mean a sales team that will underperform regardless of how much you pay them.  

2. Selling Capabilities: The market has changed dramatically over the past few years. If your sales team's skills haven't kept pace, they will struggle to hunt, sell consultatively, qualify prospects, and successfully close deals. 

3. Performance Conditions: The sales support system encompasses processes, CRM utilization, marketing support, and territory management. Any shortcomings or inconsistencies in these areas can hamper overall performance. 

Smart Strategies for Progress 

Before leaping into compensation adjustments, you need to answer the following crucial questions:  

• Identifying the Right Team: Can the current team get you to where you need to go? 

• Role Segmentation: Do you differentiate between hunters, farmers, and account managers? 

• Leading Indicators: Have you identified the key indicators that drive sales success? 

• Managing Performance: Are you willing to phase out underperforming "C" players who've been with your team for over a year? 

• Money Conversations: Which team members struggle when discussing financial matters? 

• Defined Processes: Is there a standardized sales process that everyone adheres to? 

• Leadership Role: Are your sales managers primarily selling or effectively managing the team? 

• Unpacking Excellence: How do your top performers' skills differ from those who underperform? 

• Training Analysis: Have you pinpointed precise training needs and gauged the training's return on investment? 

• Coaching Priorities: What learning and coaching areas promise the most significant performance impact? 

Jumpstarting sales is a complex problem. There is no simple solution. That's why tweaking compensation plans rarely works.  

Ditch the notion that modifying compensation plans is a quick fix. Instead, delve into your sales team's motivations, processes, and capabilities. By addressing underlying issues and focusing on coaching and growth, you will fix the problem the right way, the first time. Remember, a holistic understanding is the key to unlocking unprecedented sales success. 

Jim Peduto is the Managing Partner and the co-founder of Knowledgeworx, LLC. Owners and CEOs rely on Jim's strategic thinking and transformational growth expertise to win market share and achieve performance gains.