In a BLR webinar titled "Sales Compensation Strategies: How to Motivate and Re-Energize Your Sales Staff in a Challenging Economy," Dan Kleinman outlined three steps for evaluating your sales compensation strategies and ensuring they do not result in a situation where you are paying inequitably or paying for behavior that does not generate results.

In part 1 of this article, we introduced the first 2 steps. Step two was understanding how to best utilize at-risk pay. Here is more of Kleinman’s advice on this topic, along with the third important step.

When implementing at-risk pay, it is important to remember that it must actually have risk; the extra payout only comes with meeting or exceeding targets. Performance below threshold is risky, and employees at this level will not earn as much. Performance merely at the threshold may even provide less than the market remuneration. Performance beyond the target, however, has substantial upside pay potential. That said, a big failing point is to adopt an at-risk program, when the staff members are not risk takers.

Implementing an ineffective at-risk pay structure can also be a reason that you experience pay compression. You can end up with a situation where the best salespeople are paid similarly to the least effective salespeople. This is de-motivating for your best performers and probably is not incentivizing the behaviors you really need. It's important to remember that compensation costs need to discriminate on the basis of results. There has to be meaningful differentiation between top and bottom performers. Not everybody should score the same or achieve the same in the sales program. If they do, you either have poor goal-setting processes, or you have to question whether you have any real selling going on. For example, you will likely see distribution like this in a successful program:

• 20 percent are out of the at-risk money
• 20 percent achieve threshold goals
• 45 percent meet the target goals (or slightly above)
• 10 percent exceed the target substantially
• 5 percent are the rainmakers

Step three: Separate selling from ticket-taking.

Finally, for your sales incentive scheme to be successful and to reduce pay compression issues in your workplace, you need to be sure you have separated real selling from "ticket-taking" activities. This means you need to define your true sales staff and understand which employees to offer at-risk benefits and opportunities. Getting this differentiation right will help to maximize the outcomes and profitability for the company.

Regardless whether it’s relationship or transactional selling, real sales people influence the customer’s decision and cause the close. The true sales staff members are the ones that take prudent risks, believe in their skills and abilities, understand and identify with the company and its mission, and optimize their time accordingly. Ticket takers, on the other hand, are not true sales people. They may handle easy renewals or cashiering, for example. These tasks are all critical – and sometimes cost effective – tasks worthy of compensation, just not sales compensation. When companies mistakenly pay support staff as sales staff, this can increase the pay compression in their organization.

The above information is excerpted in part from a BLR webinar titled "Sales Compensation Strategies: How to Motivate and Re-Energize Your Sales Staff in a Challenging Economy," with expert Dan Kleinman. For more information on sales compensation and pay compression challenges, order the webinar recording. To register for a future webinar, visit http://catalog.blr.com/audio.

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. (www.dankleinmanconsulting.com) For the past 18 years, he has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services.