How to Deal With Poor Sales Performance: A Four-Step Plan
Why are compensation plans usually the last place sales leaders look when a sales team is underperforming?
While low performance is due to several factors (your company’s reputation, GTM strategy, hiring process, etc.), your sales compensation plan is one of the most powerful growth levers available to influence seller behavior.
If meeting and exceeding your targets is a challenge right now, you’re far from alone. Only 6% of CSOs can say they feel extremely confident about their team’s ability to reach their revenue goals. This post will share four steps you can take today to improve performance, including creating a solid compensation plan that incentivizes winning behavior.
Let’s dive into how you can create a data-backed sales strategy that leads your team to success.
Step 1: Is Your Sales Comp Plan is Helping or Hindering?
What if we told you how you compensate your sales reps impacts your company’s reputation in the market?
If this seems far-fetched, take the reputation of car salespeople as an example. How their commissions are calculated has created a notoriously bad taste in consumers’ mouths, resulting in industry disruptors like Carvana bypassing the dealership model entirely.
Think of your sales compensation program as the spine of your sales organization. Your comp plan incentivizes and guides behavior. It also connects individual goals to corporate goals and communicates explicitly (or implicitly) where reps should focus their efforts.To overcome biases leading to suboptimal sales comp plan designs, ensure your corporate context is the guiding principle during incentive program design. #salescomp #icm Click To Tweet
Despite the considerable expense involved, many organizations struggle to develop and manage an efficient and effective sales incentive program. Below are the most common compensation struggles.
Common Compensation Plan Pitfalls
Problem #1: Unattainable quotas
Why it happens: You designed your comp plan based on general benchmarks instead of your company’s unique context.
Using your competitors’ compensation programs or infusing elements of past programs leads to the dreaded “Frankenplan.”
Solution: Emphasize your unique corporate context during comp planning
To overcome biases that lead to a “Frankenplan,” make your unique corporate context front the guiding principle during incentive program design. Context ensures that compensation plans are kept simple and focused on what truly matters to your success. The best way to understand your company context — besides values and internal philosophies — is through historical data.
Two companies that may seem very similar at first glance will look very different once you take a granular look at their customer profiles, historical transaction data, average contract value, etc. Structure your compensation plan components, quotas and territories based on objective historical performance data for best results.
Problem #2: Unbalanced territories
Why it happens: New sales leaders come in with comp plans that worked in the past. The problem is they lack the context of the new company. Here’s where it gets messy: the new leader wants to impose their playbook on the current comp program, and existing leaders in Finance, HR, and Sales want to preserve elements of the existing comp program.
The result is that they wind up meeting somewhere in between, resulting in a Frankenplan with disjointed elements that lead to suboptimal sales performance.
Solution: Make sure your comp plan is incentivizing the right behavior.
Be careful with individual product or service incentives, which leads to salespeople dropping products and shifting their focus away from improving sales for the business, or worse — unintended perverse outcomes.
Problem #3: Lack of rep engagement
Why it happens: You’ve checked all the boxes of a winning compensation plan, but there’s one problem: your reps didn’t engage with it. Other than design and administration, communication is one of the three pillars of sales compensation excellence. Without it, your reps won’t understand the plan or how to make money from it and will fail to produce the desired results.
Solution: Improve Communication
Communicating compensation to sales reps is an ongoing process. Monthly spreadsheets or PDF summaries aren’t enough.
Reps need to understand how their commission was calculated quickly and easily so they can tie it to deal elements and identify opportunities in the pipeline that can bring similar value.
Your reps AND your bottom line will thank you.
Step 2: Create Your Sales Coaching Plan
Sales leaders tend to fall into two traps when dealing with poor performance. First, managers immediately think more sales training is the solution, investing too much time and resources into reps that aren’t a great fit. Or, they default to PIPping the representative too early.
While Performance Improvement Plans (PIPs) sound great in theory, understand that most reps take PIP as step one in an eventual termination process. Knee-jerk reactions to performance issues have costly consequences.
Instead, take a step back and strategically assess the next best move when dealing with underperforming reps:
1. Clarify expectations early and often
You should bring mandatory KPIs and metrics up in every group and 1:1 meeting. It’s human nature to want to know where we stand within the larger group and the “why” behind our jobs. You may feel like a broken record, but when reps always understand how they’re measuring up, you create a culture of “no surprises.” Most importantly, explain how these KPIs relate to your compensation plan, and how they will be used to assess performance (aka. will it impact their job security).Even the best sales compensation plan will fail if you don't properly communicate how it benefits reps or if they don't trust you to calculate it correctly. #salescomp #sales Click To Tweet
2. Take a hard look at your compensation plan
If your reps hate their commission plan, they will miss their targets. If top sales reps are walking out the door, it’s probably your compensation plan.
Common reasons sales reps hate their commission plan:
- They think the program is designed to limit their earnings
- They believe the quotas are unfair
- They don’t understand how to make money from the plan
- They don’t trust you to calculate commissions correctly
Even the best sales compensation plan will fail if you don’t properly communicate how it benefits reps or if they don’t trust you to calculate it correctly.
3. Be open to constructive feedback about your management style
There is no one-size-fits-all management style, and your reps may react negatively to yours. Low performance is a symptom and not a root cause. CloserIQ recommends questions like, “Is there anything I could be doing to better support you?” or “How would you like to be managed?”
You might not be able to implement the changes they ask for, but the goal is for your rep to feel heard, which can go a long way for morale.
Developing a winning culture starts with understanding your people’s “why,” earning their trust and being transparent about your path and need for change. People will get in the boat with you when they feel included, and their feedback and input are heard. When they are part of the change, the likelihood they are bought in increases exponentially.Carson V. Heady, Author of Salesman on Fire.
Step 3: Create Data-backed Sales Goals
Here are the two necessary ingredients for creating a high-performance sales team:
- Make your reps feel involved in creating their goals.
- Help team members understand how their day-to-day activities get them closer to their sales quotas and long-term goals.
Making these two activities central to your sales management technique is known as Management by Objectives (MBO). MBO was popularized by management guru Peter Drucker’s 1954 book, The Practice of Management.
Here’s how to execute MBO management techniques within your team:
1. Get buy-in from other departments on your goals
Too many sales managers are setting targets in a silo. Lack of company-wide collaboration leads to organizational misalignment. Including leadership across several departments when creating your goals results in high performance.
2. Present those goals to your team and fine-tune them
Have a one-on-one with reps to establish their personal goals. Avoid one-way conversations. Be open to their feedback about what’s realistic and what isn’t so you can fine-tune your strategy.
3. Build a system for continual performance and progress monitoring
Once you’ve created a plan, it’s critical that you monitor progress daily, weekly, and monthly. Your team will go into a heads-down mode, so stopping to assess progress gets overlooked, causing reps to go off-track.
Ensure your tech stack has easy-to-read reporting and dashboard features that allow you to pull up progress in seconds. Visibility is a key component of motivating behavior. If reps can’t see how they’re performing regularly, then power of the incentive will wane.
Schedule your feedback sessions ahead of time so reviewing these reports becomes mandatory.
Step 4: Know When It’s Time To Cut Your Losses
Letting reps go due to performance issues is never easy, but handling it correctly prevents these events from eroding company culture. It’s the people behind a company that determines its success. Every day, the right players will improve your culture, while the wrong ones slowly eat away at it.
Every sales team (even the highest-achieving) will have underperformers. Ironically, sales leaders spend the most time on reps who consistently fail to hit quota. While coaching is essential to help lower performers improve and reach their potential, as leaders, we need the ability to discern when that potential is limited.
That may sound harsh, but in many cases, there isn’t ROI to gain from continuing to invest in a failing rep. Keep these two principles in mind when letting a sales rep go.
#1 Before you identify an underperforming sales rep, understand what constitutes overperformance
When you know what greatness looks like, you’ll make better staffing decisions and be able to spot poor sales performance sooner.
Model the data around the activity and performance of your sales reps. Use that as a guide to make objective decisions about how long is too long to ramp up and signals that a representative isn’t a good fit for the company or product.
#2 Focus on retaining your top performers
Realize that every organization experiences rep turnover and that it’s the nature of a merit-based role like sales. Underperforming salespeople are usually just as unhappy at the bottom of the leaderboard, so letting them go frees them to do better in their next role.
Sales Hacker recommends measuring your team members on these four elements:
- Performance and cooperation — Do they consistently miss their sales quota? Do they avoid admin tasks like updating Salesforce?
- Competence and accountability — Have they proven they’re capable of doing the job at hand? Are they knowledgeable and focused enough to complete their responsibilities?
- Commitment and attitude— Are they willing and enthusiastic about performing the activities needed to hit their goals? What’s their attitude toward going the extra mile to succeed?
- Cultural fit — Are their values aligned with the company? How well do they interact with team members?
Bottom Line on Dealing With Poor Sales Performance
To understand the root cause of subpar sales performance and make a plan to fix it, first analyze your compensation program. It is often playing a bigger part in underperformance than organizations realize.
Use data to get a meaningful and objective picture of what “good performance” looks like across your sales organization and instill company context into the plan design.
Coaching your reps back to success when low performance requires good communication and constant reminders of the KPIs. By analyzing your compensation plan, you can ensure that you aren’t limiting rep earnings, giving unfair quotas, unequal territories, or creating a program that is too complex to be motivational.
When your sales team is bought in on the company’s overall goals and feels understood and acknowledged, you’ll develop a high-performing sales culture that consistently meets and exceeds goals.
Our work at Forma.ai is to make sales compensation more valuable to your business.
We use a collective data model to drive unparalleled results for our partners. Discover how our platform automates and optimizes your entire incentive compensation process here.