Better sales compensation management
- 21 September, 2009 12:07
Figuring a good sales compensation plan is like making oil and water blend smoothly. Sales people always think management is cheating them out of commissions. Management always thinks sales people are stealing them blind. Owners of companies who manage the sales people themselves often focus on the dollar paid in commission rather than thinking of the associated twenty dollars of company revenue.
Large companies can afford expensive programs to handle sales compensation management, but smaller companies almost always use a spreadsheet. Now a relatively new company, Makana Solutions, says its product will make compensation problems a thing of the past for small businesses.
Liz Cobb, CEO of Makana Solutions, says small business people have little experience creating and managing sales plans. “We help them avoid the trial and error method.”
Makana targets companies with 50 or fewer employees. Most of its customers average about 10 sales people in their planning module, and about 20 sales people in the module that tracks and calculates sales commission. But some customers have as few as three sales people enrolled in the Software-as-a-Service program.
One such customer is Linda Stillwater, HR manager for AutoSmart America, a used car dealership in Detroit with two locations. AutoSmart has a total of 18 employees and four sales people managed by Makana.
“Before we used various spreadsheets,” Stillwater says. “Payroll took three or four days to figure it out. With Makana we get payroll done in 15 or 20 minutes.”
Stillwater started using Makana eight months ago. She started with AutoSmart America almost five years ago and had no sales compensation experience. “I started out in finance, and since we’re a small company, got pulled into helping with payroll,” she says. She’s working to add the sales managers into Makana, but she’s been distracted.
“Detroit’s been in recession for two years,” Stillwater says. “Our focus has been on marketing and customer acquisition.” One advantage in a tough market is loyal employees, as well as loyal customers. “Our reputation is we sell good used cars that last for years, and we want to keep our employees.”
Even though AutoSmart sells only 40 to 60 cars per month, and there’s a limited number of commission options on each car, there’s still enough confusion to make sales people paranoid. Commissions vary based on the total amount of the car sale and gross profits, as well as a few other details. After struggling to figure out a sales compensation plan that made everyone happy, Stillwater latched on to Makana when she found the company on the Internet.
“Now we can model changes in the sales plan and see how it will change dollar compensation levels,” Stillwater says. “We can get everyone to agree to a new plan by showing them the details ahead of time.”
The sales people themselves don’t use the software, but Makana provides plenty of charts, graphs, trend analysis and explanations. Sales managers can show the sales people their individual account information and provide reports with their commission checks.
“Before, the sales people would get out calculators and check our math to make sure they got every penny,” Stillwater says. “Now we can give them spreadsheets and they can calculate themselves.” More information means less paranoia and hurt feelings. Unhappy sales people don’t sell well, and good compensation software eliminates misunderstandings.
AutoSmart uses Makana Motivator Pro, the top end module that calculates payments. For this it pays $29 per month per sales person. Makana Motivator Express creates the compensation plans and provides reports, but doesn’t crunch any numbers. This plan costs $19 per sales person per month.
Four sales people in Makana cost AutoSmart $116 per month. That payment cuts payroll time down from four days to 20 minutes and provides reports to ensure the sales people they aren’t being cheated. Even the tightest wad of a sales manager should say that’s a good value for dollars spent.
Makana CEO Cobb said a down economy makes a good compensation management plan more necessary than ever. “Companies want to make every sale more profitable. You want to encourage sales people to sell products and services that make money, not just the ones that are easy to sell.” According to Cobb, one truck servicer company increased gross margins 2% by building profit management into the sales compensation plan.
One thing I learned way back when I had to manage sales people is they always, let me repeat, always, focus on the highest commission product for sale. Telling sales people you have lots of blue widgets in stock to clear out won’t get them to talk blue widgets with customers when you pay more commission on red widgets. If you’re still doing sales compensation with a spreadsheet those types of issues take time to find and fix.
Replacing sales people takes time, money and training, none of which make you more profitable. Keeping your sales people provides continuity and helps you get maximum revenue from each existing customer. Makana says it can help you create a sales compensation management program that will keep both sales people and sales management happy.