I speak with CEO’s and senior executives on a regular basis regarding compensation issues – especially when it comes to paying high powered sales leaders. While some CEO’s truly understand the reasons that successful sales performers should be highly compensated, many still just don’t get it. During this economic downturn, we are now beginning to wind out of, many of our clients are still engaging us on search assignments to find and place proven sales talent that can positively impact the revenue of the company. Let’s face it, nothing happens until something is sold. Good sales people make a lot of money! Period.
Back to my point. In my career, I have seen first hand how a compensation package designed for individual contributors and sales managers can really move the needle on the revenues of a company. There is constant pressure to drive revenue and organic growth, particularly with publicly traded companies who have to deal with shareholders and analysts who expect a return on their investment.
So the question is: Why do some CEOs struggle on paying high commissions and bonuses to those who meet and exceed their sales objectives? I have a few examples I have seen firsthand that just baffle me…
- Sales People Should Never Earn More Than the CEO: That is so old school and counter to what is in the best interest of the company. If a sales person earns more than the CEO, he or she probably deserves it, and the company is really the winner anyway. Increased sales and profits means the company can gain new market share, displace a competitor or enter a new market or line of business because of the success the sales person had in selling the company’s products and services. Who cares how much money they are making? Well, in some cases (sadly) the CEO does. I think it gets down to ego. Sad but true.
- It Sends the Wrong Message to Other Departments: What? Some believe that the finance or operations people work harder than the sales person and therefore should earn more than those calling on customers in a pure sales role. That is total BS. They have this vision of sales people playing golf or taking customers to dinner and – hell, that’s not work. Is it? Operations people deploy resources to deliver goods to new and existing customers as a direct result of what gets sold. Period. Finance generates invoices, creates accounts receivable and is able to produce a better looking profit and loss statement every time the company is able to recognize revenue (again) sold by the sales person. That’s the way it works. Get over it.
- Sales People Don’t Deserve to Earn That Much Money: Selling is not hard work (yuk yuk), and sales people don’t deserve to make a lot of money while others are required to deliver goods and services or install products sold by the sales person. The sales guy makes the sale and dumps it in someone else’s lap to deal with and exits the scene. Correct (job well done). So what? Here’s the reality. Many people don’t have what it takes to be a successful salesperson. They wouldn’t even know where to start. Actually, they are better at beating up on those in sales than delivering their own value equation. Beat up on sales. Counterproductive? Jealous? Yep. Pure and simple.
I certainly don’t believe in paying something for nothing. Never. However, successful sales people need to be paid based on the value they deliver. If they over deliver – they should be overcompensated for the extra revenue and profit they created. Plain and simple. And for those who disagree with how sales people should be paid – I have some advice:
- Why don’t you try it. Suit up, ask for a territory and a quota and see how well you do. If you are really good, you will see how hard it can be to be in sales and why good sales people earn a lot of money. If you fall on your face, you will likely still find reasons why sales people earn too much.
- Get rid of all sales people in your company and just wait for the bottom to fall out. Trust me, it will. Wait. I know. Maybe customers will start calling YOU and begging YOU to sell them your goods and services. Yeah. That should work. NOT!
In the end – in sales, what gets measured gets done. Don’t make the carrot a joke when it comes to compensating sales people. They will figure it out and leave. If they are good – that could spell trouble. Pay sales people what they are worth and for the revenue they deliver, and your company will experience positive results for every employee, shareholder and for your customers. It works! Trust me.
Tim Tolan is a partner at Sanford Rose Associates and specializes in Executive Search in Healthcare IT. He’s a closer, and you really don’t want to call him unless you’re ready to bring out the bazooka to bag some big game. When I started Fistful, I checked four references on Tim – his wife, his kids, his pastor and a client. The references were great, even if it sounded like they were reading from a sheet of paper. I just chalked that up to them being “detail oriented” in their feedback….