When CEOs discuss sales performance, the focus is almost always on compensation: what kind of behavior, how much, and how much. There are two reasons for this. One is for practical reasons, the other is quietly counterproductive.
The practical reason is straightforward. For most B2B companies, compensation is the largest line item in the sales budget. This is a significant cost that needs to be managed effectively. But the second reason is more problematic. There is a pervasive and often unexamined idea that salespeople are “coin-operated,” or motivated primarily by money. At best, this belief is outdated and naive. At worst, executives overuse or misuse compensation as a key driver of sales force performance.
The best sales teams I've ever seen, and research backs this up, aren't primarily driven by bonuses and commissions. They are motivated by purpose, making a difference to customers and creating value in the marketplace.
Yes, compensation is important. This is a necessary part of improving sales performance. But compensation alone isn't enough to drive the kind of consultative, value-focused behavior CEOs always want from their sales teams.
Too many CEOs unintentionally hurt operating results by relying heavily on compensation as a management tool. Here are three common ways this manifests itself in your business and what you should do instead.
1. Move from sales to profit-based compensation and reduce discounts
It may be logical to move sales compensation from revenue-based payments to profit-based payments to reward trades that protect margins. But without strategic guidance and coaching, this change is unlikely to yield results.
I worked with a company that was transitioning to private equity ownership with a new mandate to prioritize EBITDA over gross revenue. Compensation plans were overhauled to reflect this, but salespeople continued to rely on price cuts to win business, even though their incomes were reduced.
why? Because salespeople weren't taught how to create more value earlier in the sales process, engage higher-level decision makers, and expand the range of solutions they could offer. Discounting is still their default move. Compensation changes do not improve a salesperson's ability to win business based on value.
2. Allow reward metrics to be used instead of strategies
In the absence of a clear and actionable plan, compensation metrics often serve as a proxy for go-to-market strategy. Executives want to drive results and translate goals into incentive structures. But when metrics become a substitute for consistent strategic direction and coaching, results can quickly go off track.
Goodhart's Law captures this risk perfectly. “Once a measure becomes a goal, it's not a good measure.” It's not the metrics themselves that are dangerous. This is an unintended consequence when sellers are optimizing for compensation rather than customer fit or long-term value.
I've seen companies implement generous incentives and see new business soar. However, many did not match the company's ideal customer profile and proved to be a poor fit due to limited long-term potential, high customer support costs, and unrealistic customer expectations. Sales teams may succeed in winning new business at the expense of pursuing business. right work.
As a leader in your organization, your strategy needs to paint a clear picture of what the right business looks like, and you need to make sure your sales leaders are in sync with your vision and reinforcing it in the field.
3. Use SPIFF to promote your product instead of solving customer problems
SPIFF (short-term bonuses for sales of specific products or services) is a common tool to draw attention to new products or boost underperforming companies. Although the purpose is to provide clarity of focus, the effect is often to misalign perceptions between sellers and customers. Salespeople are encouraged to prioritize what is more profitable, rather than being proactively driven by customer objectives and needs. Which may or may not be the best fit for you. The result is a more transactional approach that sacrifices long-term value for short-term gains.
When I talk to CEOs about this, I ask them if they've ever been sold something that just doesn't fit what they need. The answer is always “yes” and the experience is never explained positively. It erodes trust and turns what should be a consultative, customer-focused approach into a low-value transaction. Never mind the issue of opportunities being ignored by sellers in favor of SPIFF.
Instead, make sure your prioritized product strategy is clear across your sales organization. Help your team understand why your product or service is important, educating them about the specific problems it solves and the opportunities it can help them capture. Then, make sure your sales leaders are actively managing in the field and coaching reps to connect solutions to real customer situations. Once sellers understand this and are coached to implement the strategy on every sales call, there is no need to dangle extra incentives.
Great sales organizations, and those that drive true market growth, aren't supported by compensation plans. It is guided by a clear strategy, strong leadership, and a commitment to being at the forefront of coaching on how to execute the strategy on every sales call. As a CEO, your most powerful tool is not your pay structure. It's the leadership you provide and the expectations you set for how your team will win.
