EPISODE 672: Use Compensation Right to Get Optimal Sales Rep Performance Says Lee Salz

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Today’s show featured an interview with sales management strategist and best-selling author Lee Salz.

Find Lee on LinkedIn.

LEE’S TIP:  “The sensitivity that executives and business owners need to have with sales compensation is, first understand the needs of the business and the activities and behaviors you’re trying to drive, and then use compensation as the lever to get those salespeople to do what you want them to do.”


Fred Diamond: Welcome to another episode of the Sales Story and a Tip podcast. My name is Fred Diamond. I’m also the host of the Sales Game Changers podcast. And of course, I’m the cofounder of the Institute for Excellence in Sales. You can find this podcast on all the usual places that you get your podcasts, Apple, Spotify. We are also on YouTube and posting these on LinkedIn as well on the IES. The Institute for Excellence in Sales groups as well. I’m excited for today’s show.

We have Lee Salz, as Lee, of course, is the author of “Sell Different” and “Sales Differentiation.” And he also was the IES Sales Speaker of the year for 2022. He’s a good friend of the institute, sales expert, sales strategist. Lee, it’s great to see you, and I’m excited to hear your story today.

Lee Salz, tell us a great sales story.

Lee Salz: Fred, you asked me about a sales story, and there was one that just popped to mind. Years ago, I get a call from the CEO of a company very, very frustrated about the performance of a sales organization. He says, Lee, you got to come in and take a look at what we’re doing. So, I go in, and they had a trade show and generated, I think it was 157 leads from that. And the salespeople were not eager to receive the leads. They were like, oh, I don’t want leads. And I’m scratching my head going, I don’t understand. Why don’t you people want leads? Was it that they’re not qualified?

He says, no, no, no, that wasn’t it. I said, tell me about how you compensate them. He says, what do you mean? I said, how do they make money? Oh, I just pay them all straight salary. So when they received those leads, Fred, what they received was work, right? They dumped 100 and something leads, and someone says, oh, my God, I just got all this work to do. And it was interesting.

We changed the compensation plan after this conversation to an incentive-based plan. They had another trade show. There was a line of people outside the CEO’s office saying, why did Joe get more leads than me? They were the same leads. The perception of the leads was entirely based on how the salespeople were being compensated.

Fred Diamond: That’s a great story. What kind of a company was this?

Lee Salz: It was a technology services company.

Fred Diamond: So has that new compensation plan been instantiated since you did this?

Lee Salz: It has. It’s been in place since several years. And I’ve had the same thing in several different companies. Maybe not that they paid straight salary, but that they weren’t compensating in alignment with the needs of the business. There’s another group that I’m working with. We did lots of things together, playbook, all these different things. But the CEO comes back to one key point. He said, when we change the compensation plan and in their case, tied it to quota, that’s another issue that I see is we give salespeople quotas, and on the other side, we say, this is your compensation plan. And there’s no correlation between the two. They’re not connected. But when you don’t do that, the quota is just background noise. So. what happens is they sell enough to satisfy their personal needs. Whatever the comp plan way it’s structured, more often than not, what they need and what you need them to produce are two very different sets of numbers.

So the tip that this really brings to mind is when you compensate salespeople, nothing affects activity and behavior more than how you pay them. Get it right and it’s bliss. Get it wrong, and the laws of unintended consequences take over. So you have salespeople that reject leads because you’re getting paid straight salary. They see it as work, not opportunity. So if you made that change to an incentive based plan, that was opportunity. I want more. So, amazing. And this happened like a light switch. It was very, very quick. And the same thing.

When you look at quota or goal attainment, if you’re not going to connect that back to how you’re paying them, no one’s going to care about that quota except you. There was a client I worked with, and when I first started working with them, I asked each salesperson, what’s your quota and how are you doing relative to it? That one salesperson could tell me what the quota was or how they were doing relative to it. But when I sat with the executive team, the executive team, each one of them could say, oh, Joe’s is $100,000 a month and he’s at 72,000. To the penny almost, they could tell me for each one of them because they hadn’t connected quarter payment with earnings.

So the sales people didn’t pay any attention to it. So the sensitivity that executives and business owners need to have with sales compensation is, first understand the needs of the business and the activities and behaviors you’re trying to drive, and then use compensation as the lever to get those salespeople to do what you want them to do.

Fred Diamond: All right, that’s a great story from Lee Salz and a great tip. My name is Fred Diamond. This is the Sales Story and a Tip podcast.

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