Once a rep is promoted to sales manager, expectations change. Where they once were laser-focused on their own goals, they’re now responsible for training and enabling a team of successful reps.
This raises the question: How do you motivate sales managers, and how is that different from managing a sales rep?
In this article, we’ll explain how to set up sales managers for success – and zero in on one key element of sales motivation: compensation strategy.
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Top tips for supporting a new sales manager
Before we dive into the specifics of your compensation plans, it’s important to cover the basics of installing a new sales manager – whether you’re hiring a new employee or promoting a sales rep. Before you assign them a new commission plan and expect them to start delivering, you need to make sure they’re set up for success.
Companies often make the mistake of thinking a high-performing sales rep will automatically become an equally successful manager. The goals of a rep and manager are very different – so you need to take steps to support them during the transition. Here are a few tips.
Take it slow
Don’t expect new sales managers to seamlessly transition into their new roles and immediately align their day-to-day activities with the expectations outlined in their compensation plans. Put them into a process that takes place over a period of time. Let them shadow other managers, get to know their teams, and test out their leadership skills before giving them a number of challenging goals and making them fend for themselves.
Maintain open lines of communication
The transition can be challenging for a new sales manager who is used to focusing on their own deals and is now charged with leading a team. Make sure you support new sales managers with a number of communication channels where they can ask for help and feedback from sales leadership.
Provide a blueprint for success
New sales managers often struggle to know what success really looks like. Sure, they have measurable targets for them and their teams. But they must also think beyond the numbers. What’s the most effective way to keep morale high? What training procedures should they implement for new reps? How should they approach reps who are struggling to hit their targets?
Provide new sales managers with a clear picture of all the potential challenges they’ll face and how to successfully conquer them.
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How to structure compensation plans to motivate sales managers
Now let’s turn to the topic of compensation. While the process for designing manager comp plans and rep comp plans might look the same, the details of these plans must be very different if you want to encourage top performance of your sales managers. Here’s how to get started:
1. Offer a higher percentage of base pay vs. variable compensation
One of the trickiest parts of building any compensation strategy is finding the balance between base pay and commission. Pay mix for sales reps typically falls in the range of 40/60 (base/variable) to 60/40, with many companies opting to offer a 50/50 split. This strategy gives reps a solid safety net while incentivizing them to perform in order to maximize their earnings.
Sales manager compensation plans are different. When a rep is promoted to manager, it generally means an increase in their base salary and a small decrease in their variable or at-risk pay percentage. This doesn’t necessarily mean that they’ll earn less commission, but rather that the base/variable ratio should tip in the favor of base pay.
This is an effective strategy for a few reasons. For one, sales managers have proven themselves as impactful employees, so an uptick in guaranteed pay is a natural progression that shows how much the company values and trusts them.
More importantly, emphasizing base pay motivates the sales manager to focus on fostering a healthy team environment. If you’re over-incentivizing the sales manager’s quota attainment, you’re encouraging them to focus too much on their own results and less on the processes and strategies that will support the entire team’s success.
For this reason, it’s wise to implement something like a 70/30 or 80/20 base-to-variable compensation ratio for sales managers.
2. Incentivize both team attainment and company attainment
When it comes to variable pay, there’s an ongoing debate: Should a sales manager be compensated more for the performance of their team or the performance of the organization as a whole?
In most cases, team performance should be the sales manager’s main priority. You want sales managers to take an active role in their team’s efforts, and compensating them based on team performance is the best way to motivate them to do so.
It’s wise to tie 65 to 75% of a sales manager’s variable pay to their team’s performance. You can also implement a tiered commission structure that accelerates a manager’s commission pay if their team exceeds expectations. In other words, the manager earns a fixed rate on all deals closed by their team, but the rate increases once the team has surpassed quota.
It’s also important to consider the company’s success at large. If you tie 10-20% of a sales manager’s variable pay to company results, you’ll encourage them to collaborate with other leaders to achieve universal goals. This portion of their compensation can take the form of a hit-or-miss performance bonus – if the company hits a specific revenue target, then all sales managers earn a chunk of the shared bonus.
3. Include a small percentage for individual contribution
Some companies instruct their managers to sell and give them a small quota, while others believe sales managers should not focus on any individual selling. It’s a hotly debated issue – but there are advantages to tying a small percentage of a manager’s variable pay to individual contribution. If they have a small quota, they can lead by example, demonstrating how sales should be executed. It also helps them stay “in the know” on the latest trends and challenges faced by reps.
These activities don’t need to be high-volume or time-consuming, of course, as you still want sales managers to focus on enabling their team’s success. But try to make each sales manager responsible for a certain number of deals per month – or, for an SDR manager, a certain number of phone calls and meetings booked per month.
By doing so, you’ll keep the manager’s selling skills sharp, bring in additional revenue, and foster a healthier team environment as reps will see their manager demonstrating some of the same efforts as they do.
Motivate sales managers with clear comms and transparency compensation
Companies put a lot of time and effort into sales compensation, ensuring that every sales rep remains motivated to achieve the right goals at the right times. Make sure you put the same thought and energy into sales manager compensation – which will look very different but be just as effective at motivating performance that supports the organization’s success.
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