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and revenue potential variables can then drive your decision on sales numbers. However, as you build your organization, over time, it has to be of sufficient size to be effective. Sales professionals juggle many responsibilities, from prospecting and closing to generating proposals. Make sure that there are enough sales professionals to be effective in a target region or industry marketplace.
Creating a Compensation Plan
According to research conducted by the Society of Human Resource Managers (SHRM), a solid sales compensation plan:7
• Creates a beneficial relationship for both the company and the employee.
• Can expand and contract, depending on economic conditions.
• Focuses on increasing profit, not just revenue. This is a slight difference that is sometimes difficult to measure but much more advantageous to the company.
A poor compensation plan may have the following problems:
• Inf lexibility/inaccuracy in quota setting
• Quotas that are inconsistent with company goals
• The absence of a clause allowing the company to make changes or to respond to exceptional events
A poorly designed pay plan causes salespeople to focus on the wrong things or causes them to stop selling completely—either because they have surpassed their goals or have no realistic chance of attaining them.
The preceding research provides some guidelines for developing your total compensation plan. However, structuring a sales compensation plan within the professional services firm is more intricate. It is a uniquely challenging subject, primarily because the sales professional and the professional consultant, or service provider, are asked to share the account and the revenues generated by that client. Who gets credit and who pays are the biggest challenges in securing practice leader buy-in. Patrick Strong, managing director at FTI Consulting, Inc., termed compensating the salesforce as the single biggest problem8 in securing practice leader buy-in. Sales is not free. On average, 7 percent of the client professional fees go to supporting the sales organization. While practice leaders will be fine with paying for found revenue, or new revenue that is brought in by a sales professional, it becomes more complicated when sales professionals begin working with veteran clients or when a consultant uncovers a lead and the salesperson accompanies that consulting professional on the sales call.
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Understanding this delicate terrain is essential for the manager in a professional services firm. Before covering actual commission schedules and structured compensation plans, here are three management techniques to help in this challenging environment:
1. Get buy-in from consulting practice leaders. Demonstrate the value add of sales, and lead practice leaders to feel confident in their decision to “purchase” the sales service. In other words, sell-in sales before introducing your commission schedule.
2. Clearly define the rules of the game. Territories and commission schedules must be clearly detailed, simple enough to understand, and directionally correct. The schedule should be based on revenue and
should fit your firm’s culture and comfort level.
3. Everyone should operate in his or her “sweet spot.” Let the sales professional create the “at-bats” and manage the sales process, and let the professional consultant close the deal. Let each player deliver his or her greatest value. Allowing consultants to close deals ensures that the client-consultant relationship can form at the early stages of the project and gives the consultant some ownership of the process. Then, while
the consultants are providing outstanding client service, the sales professional can be looking for more “at-bats.” This encourages a true partnership between sales and client service.
COMMISSION SCHEDULES. The most important thing in setting commis-
sion schedules is to be directionally correct—the schedule should be simple and should fit your firm’s culture and comfort level. In the end, the firm must arrive at a commission structure that the client services and sales professionals are comfortable with. If the salesforce is organized correctly and the firm has established a culture in which your sales professionals work for the entire company and are viewed by the client service professionals as partners, coming up with a commission schedule will be relatively simple. However, if a true partnering mentality has not been formed between the sales organization and the practice areas, agreeing on a commission schedule will likely be marked by conf lict. In a true partnership, your client service professionals will respect the sales professionals and will be comfortable with their earning the same amount of money or perhaps even more. If the client service professionals think of the salespeople as less valuable to the firm or capable at their specialty, a true partnership does not exist. In this situation, the professionals will want to control the salespeople through elaborate commission schedules.
This is the wrong place for client service professionals to place their control, and legislating behavior through commission schedules will not benefit your firm or your clients.
As you strategize your commission schedule, know that there are many ways to structure a total compensation plan. Your guiding objective should be
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to develop a plan that provides the fewest obstacles for professionals to partner with salespeople. At FTI, first-year sales professionals are compensated with an annual salary, plus a management-by-objectives (MBO) bonus. After the first year, sales professionals are on a straight commission plan. A straight commission compensation plan makes using a sales professional relatively risk-free for the practice leaders; the sales professionals pay for themselves.
FTI’s commission plan includes three elements:
1. Highly reward self-originated business. If the sales professional does the heav y lifting and finds business the organization would not have found easily on its own, this is worth a lot and is rewarded the highest.
The commission schedule is up to 7 percent of any professional fees
realized.
2. Reward for value added. If a client service professional brings a sales professional into a meeting, the sales professional is rewarded for his or her value added, specifically in helping to develop the client team, managing the sales process, and so on. The commission schedule is 2
percent of any professional fees realized.
3. Account growth incentive. Each year, FTI identifies client targets that are key to the firm’s growth strategy. These targets are accounts in which the firm is already engaged and wants to grow. Each year, one to three accounts within each salesperson’s territory are targeted as VIP
accounts. Sales professionals are paid a bonus, usually a 2 percent incentive on the aggregate revenue growth over the prior year, for growth in those accounts.
Remember, the compensation/commission plan is not simply a question of whom you pay for what. Compensation plans are designed to motivate people toward the right behavior, in this case, to sell more. Your goal is to organize your sales compensation/commission plan within the parameters of what your firm is comfortable spending in order to drive the most revenue into your organization.
Building and Managing
Your Sales Team
Success is not the result of spontaneous combustion. You must set yourself on fire. To be a successful sales manager, you have to believe that everyone comes to work wanting to be successful, wanting to play at the top of his or her game.
Your job as a sales manager is to remove the obstacles that stand in the way of your sales professionals and enable them to be their best. Once this is accomplished, then look out; the sales team will deliver for you. This section,
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dedicated to building and managing the sales team, focuses on providing the insights and tools to recruit and staff the sales organization and to train and coach them to do their very best. It also provides insight into the nature of the sales professional to help you understand how to motivate your team and thus succeed in the marketplace.
Recruiting
Recruiting the best talent for your sales organization is one of the three pil-lars of your role: recruit, train, and coach. It is too common for managers to be drawn into desperation and time constraints when filling a sales role—
they react to the fear of an open territory with the philosophy that any warm body will do. While this might offer a stopgap solution and at times might even result in a successful hire, it is not a good approach to recruiting. The
“Coming Out” story at the beginning of the chapter depicted a firm that, in a desperate need for new revenue streams, selected current employees who were outgoing and friendly and assigned them to a sales role. Without professional sales management, those friendly folks were destined for failure because the sales profession is not solely personality driven; there are specific qualities and characteristics that are common to successful sales professionals.
To help establish your recruiting processes, this section reviews a standard sales job description and details the core skills and competencies that are common to successful sales professionals. This will help you to understand whom to hire. Next, this section details where you can look for these candidates and, finally, how to evaluate them through the interview process. Although there is a data-driven approach to recruiting a sales organization, don’t get buried in mechanics and forget to use your “gut.” Even more important than evaluating your candidates along set competency lines, the most critical thing to ask when recruiting a sales professional is whether he or she is ready to “bust a move.” Try to find people who are at a point in their career where they have enough experience but are blocked by something, for example, an income cap or no prospects for advancement. Hire people who will take responsibility for their own success. If you follow this philosophy, you can’t go wrong.