The average sales representative changes employers every 2-3 years. At any given point in time, I know at least a handful of sales representatives who are looking to make a move.
Why? Because companies make the same mistakes time and time again that cost them their best reps.
What are they doing? In almost all cases, companies are trying to cut costs and increase profitability. The problem is, if you cut costs, service, quality or both will also be sacrificed to some degree.
The most common complaint from managers and business owners that I have heard is that their commissioned sales representatives are making too much money.
What is wrong with this statement?
If your commissioned sales reps are making a lot of money, it’s a good thing! It means that their sales are good and the company as a whole is making more money. Reps on a 100% salary are another story entirely! So, the problem is that companies of this mindset are simply being greedy and short sighted thinking that they can try to squeeze the highest level of productivity out of their sales force for a minimal investment.
Some sales managers alike may take issue with the representatives they manage who are making more money than them. Rather than taking pride in being a good manager and celebrating the success of their sales team, they see this as a bruise to their ego and then make detrimental changes to how their reps are compensated.
Whether you are a business owner, VP of Sales or a Sales Manager be sure to avoid making these hefty mistakes which will cost you your best reps and maybe even your entire sales force.
1. Cutting and/or Capping Commission
Looking for a way to slowly poison your sales force and give them a prolonged, torturous death? Cut their incentives or better yet, cap them all together! Salespeople work on incentives, so if those incentives are taken away or significantly reduced, they will either work less or look for work elsewhere immediately. Some but very few reps will persist and try to work harder to make what they were making previously but that will not last long. They will eventually leave or burn out and then leave.
2. Territory Realignment
Trying to figure out a way to cheat your reps out of reaching their targets so you can save on paying out those commissions and bonuses? Shift their territories around every 6 months to 1 year. That way nobody has been in their territory long enough to qualify for their commission or the reps who would have been entitled to a hefty commission, no longer have that account in their territory after the change so they are no longer eligible to receive it. This strategy also makes it impossible for the sales reps to maintain any working relationships with their clients which is a substantial part of building the business. Clients don’t want to meet a new rep every year. It screams that the company is unstable and therefore potentially unreliable. Not only will the business as a whole suffer from this strategy, but it is also more than likely that the company will also lose their entire sales force. If a sales rep has no chance at making their commission or bonus, they will leave.
3. Unreasonable and Unachievable Sales Quotas
Feeling a little sadistic and enjoy dangling that carrot in front of your reps and moving it further and further out of their grasp? Give them a massive increase in sales quota that none of them will be able to achieve. I have seen well established companies that have been in business for decades implement a new sales target that is 10 to 20 times their previous target for products and services they have always sold and seen regular 3-5% annual sales increases. If a company increases a target, it must be a realistic target that can be achieved by at least 50% of the sales force. Implementing completely unreasonable and unachievable sales quotas most often results in the resignation of the entire sales force. Afterwards, good luck maintaining those regular sales increases!
4. Reducing Sales Support
Want to leave your sales representatives to hang out and dry? Cut back on their support. Sales people are out there all day long pounding the pavement, pushing the company product or service on their clients and often a situation arises where the rep needs assistance from a manager or from customer service. When companies make cutbacks in this department, the rep is left completely to their own devices and do you know what most of the good reps will start to think? “Why do I need to work for this company? I’m doing everything myself so I should just start my own business!”. Alternatively, some reps may opt to jump ship and work for another company, perhaps even one of their competitors, who offers better service and support.
5. Dramatic Change in Management Structure and/or Style
Want to take your company to the next level? Do it wrong and you’ll take the company to the next level downward! There are multiple ways companies can implement changes to management structure and style. The most common mistake I have seen are companies that have historically given their reps a fair bit of freedom (and where the reps were successful in that environment) change to a micromanagement system in order to increase accountability and profitability. This is flawed because simply some reps thrive in a micromanaged environment and some do not. If you change your management style, you will also likely need to hire an entirely new sales force that will fit nicely in that environment rather than resist it.
So if you are reading this article looking for ways to eliminate your entire sales force of “overpaid” sales representatives (without firing them so you don’t have to pay severance) and replace them with entry-level newbies who you can pay 1/3 of their salary, you may have found this article helpful. If that is the case, I hope that neither myself or anyone I know ever works for you.
On the other hand, If you have a great sales force or even just one or two star individuals and want to keep them, avoid making these costly mistakes. It takes a significant amount of time and money to hire and train the right representative, so why put yourself through this process time and time again?
If you need to cut costs, try to look elsewhere in the business where you can implement cost cutting mesures or better yet, try to explore other means to increase your business. Thinking out of the box can be difficult but it can also be immensely rewarding.
In summary, it takes money to make money. Same goes for people who you invest in as employees. If your people are doing well, don’t cheat them but rather reward them accordingly. Investing in great employees is a solid investment in your business.
Happy sales my friends.