As an entrepreneurial manager, you know that your key to growth is driving sales. You also know that the key to driving sales is an effective marketing program underscored by an effective sales force. What you’re not sure of is just how to define an effective sales force and how to set up a proper compensation program.

The first part regarding the definition of an effective sales force is really pretty simple. In the current business climate are you achieving your desired results? Here is where bumper sticker nonsense sometimes passes for professional management with responses such as “I want more,” or “We never have enough sales,” or “I’m never satisfied.” While we all may internally harbor the desire to do better, business is about dealing with reality, not false bravado. So the question really becomes, “For the money that I am investing in sales and marketing, am I generally satisfied with the outcome?”

When the honest response to this question is negative, you will often see a kneejerk reaction by amateur managers that manifests itself in the following declaration: I want to drive/increase sales therefore I need to change the compensation/reward program for the sales force. This has a very simplistic appeal. After all, just a change on the spread sheet here and there and the numbers look much better. But just a little thought reveals the futility of this pursuit. While your compensation/reward program may need to be improved, simply changing it and thinking that this change alone will result in more sales will not work. It would be like someone saying to you, “I’ll pay you a million dollars to slam dunk a basketball.” For the vast majority of us, simply increasing the reward without considering the talent requirement actually turns out to be a de-motivator. Logically, if it can’t happen, why even pursue it. Yet how many times do we see managers and business owners take the approach that, “If I increase the commissions, they’ll sell more.” And when the sales don’t materialize, the blame is always on the individual salespeople. While the talent issue has to be a primary consideration, what kind of talent are we talking about?

Let’s think of it in a different framework. First, let’s draw a line and label one end of the line “Driven by Activity.” The other end of the line we’ll label “Driven by Knowledge.” Exactly in the middle, we’ll put a point and label it 50/50. You have now designed your personal Compensation Continuum. This is how it works.

You have to first decide whether what you are selling is more controlled by a volume of early funnel activities such as mail-outs, cold calls, etc., or is success more dependent upon adding value to the customer in the form of knowledge. The 50/50 point indicates that if you feel that both carry equal importance in terms of successful selling, then the right compensation program ought to reflect about half in fixed salary and half in variable performance. As you adjust to either side of this midpoint, you adjust the balance between salary and variable performance. The extremes would reflect 100 percent commission versus 100 percent salary. Just please keep in mind that wherever you end up, the package has to be competitive with the industry and the local environment. The points on the continuum also indicate what type of selling talent you want to pursue and where you might want to invest your training dollars.

Improvement has to be the goal for all of us, but improvement needs to be rooted in some basis of understanding of cause and effects. Use this model as a starting point, and see if it doesn’t provide you with some insights for improving the effectiveness of your selling dollars.

John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes each Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at business@timesfreepress.com

07/30/2008

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