There Is No Magic Formula of Base + Bonus Percentage, So Stop Trying To Find It
Now let’s talk compensation. There is no magic formula of Base + Bonus Percentage, so stop trying to find it. If you go no further, just read the following three points on building your Sales Team compensation structure:
- Not Eerybody Gets a Trophy
- Swallow your Pride
- Find the Right Metrics
You must realize the Rain Maker- type Business Development person is a different breed. They love the thrill of the hunt…they will hear 100 “No’s” just to get that one “YES!” They see an endless supply of opportunity, and are itching to go after it. What makes most people nervous…gets the Rain Maker so excited they can’t sleep. Just as it was YOUR job to hire the right team, it is YOUR job to help build the right compensation structure to incentivize and retain your “A” players.
Not everybody gets a Trophy: Ken Blanchard once wrote: “There is nothing so unequal as the equal treatment of unequal’s.” It holds true in your Sales organization as well. Yes, you are a team, and yes, you need to be acting in the organization’s best interest. But the second you start to water down somebody’s earning potential is the second you lose their best effort. Let’s face it, with a few noble exceptions; most of us are out to take care of ourselves and our families first and foremost – we want to believe our future is brighter than our past. Fourth Quarter 2009 statistics show that 1 out of 4 people have updated resumes or are networking to find the next best thing. Most will continue to work hard because unemployment numbers remain above 10 percent. But you will never realize their full potential. Push them to perform - and reward them for it.
You need to be in the business of rewarding results, not effort.
Only results will sustain and grow your business.
Swallow Your Pride: “They can’t make that much. That’s more than I make!” Way to go, you’ve just capped the compensation of your best Salesperson. They will now go look for a company that allows them to keep earning. It may be hard to imagine right now, but we are about to enter the War for Talent. As companies begin to grow again, they will need to hire. Guess what! Nobody is searching the Unemployment Line looking for the next great Salesperson. They are going to be searching your payroll! Watch out, here come the Executive Recruiters!
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For the most part, Sales teams are the face of the company. You can’t afford to have “B” level players in that position. Protect your best people – don’t let them hold you hostage, but protect them. Whether you are a Sales Manager, Vice President of Business Development, President, or CEO – take the compensation cap off and see what your people can do. Support them, give them the tools they need, and compensate them for hard work and results – you’ll be surprised at what you get in return.
Find the Right Metrics: Danger Zone…Beware. You usually “get what you ask for.” Translated: You incentivize what you measure. I’m referring to your Metrics. How do you plan to measure and reward your Sales team? I’d start by asking you the following three questions:
- What are the three most important financial measurements in your business overall (Revenue, Material Cost, Inventory Levels, Labor Cost, Fixed Costs, Scrap Costs, Marketing Expenses, etc.)?
- What type of growth will enhance and grow your business in a healthy manner (New Products, New Services, Volume, New Markets/Industries, etc.)?
- How do your Sales plans align with the overall Company Objectives?
Answer these above questions, and you are 80 percent of the way toward knowing the right measurements.
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Aside from hiring the right people, choosing the right Metrics is the most important decision to make when building a Sales team. Be honest with where you are in the market. If you are in a price-driven, commodity type market – than incentivize your people to go after large orders in established customer bases. If you are strategically looking to branch out in to a new field, than encourage your Team to sell new services/products, even if the volumes or prices are lower than you’d like.
If it is a Company decision to go after a new market, don’t let your Salesperson take the hit. We know it takes time to build a market, and if the Company can’t absorb the drop in margin temporarily, than you shouldn’t do it, or find an alternative solution.
Remember, people and processes do what they are managed to do…even Sales people. Nobody is saying your job is easy, but it is YOUR job to build your Sales team and compensate them appropriately. Good Luck!!!!
AMEND is a business improvement firm that drives change in your people and your processes, leading to lasting transformations and true marketplace advantages. You may visit their website at www.amendllc.com. You may contact the author, Joe Rozier, at rozier@amendllc.com.
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