Compensation is something that’s easy for entrepreneurs… if they get it right. If they get it wrong, it can be nightmare. It often takes years to undo a poorly thought-out compensation policy.
Their first piece of advice is to make sure you don’t make compensation decisions one employee at a time. You need to ground your compensation figures in a comprehensive human resources strategy that aligns with the short- and long-term goals of your business. Ensure you remain competitive and are able to grow in the marketplace. Perform some research on what employees make in other companies. Can you compete with them? Can you offer some non-salary perks (stocks, flexible work hours, a Foosball table in the kitchen…) if you can’t afford to pay top dollar?
Second, understand that compensation is a changing game. You’ll need to review your compensation strategy to ensure it remains relevant and rewards your best people in a way that creates incentive to stay. That said, make sure your compensation packages aren’t too attractive. One client that worked with TechEdge created a compensation package for their salespeople so attractive that they blew through all expectations for first year sales. The only problem was that their head sales person made so much money he decided to retire and move to Bermuda, leaving the company without a sales lead.
Managing salespeople is a particular branch of human resources that requires special attention for entrepreneurs. One of the first things to think about is the kind of salesperson you need for the stage of your company. If you are eager to secure some early first customers, you need a “hunter” — a sales professional who will use every trick in the book to close a deal, including discounts, package deals, even promising features that aren’t there (yet).
Contrast this to the “farmer” — the sales professional who will nurture current client relationships to ensure repeat business. Compensating these two types of sales people is very different. Hunters are often motivated more by hefty commission fees based on their acquisitions rather than base salary. Farmers are motivated more by the long-term growth of the company.
Also, make sure your salespeople aren’t costing you more in golf games and airplane tickets than they’re bringing in. It sounds basic, but many a well-meaning entrepreneur has been undone by far less. Check out “Compensation for Sales Teams: 4 Hot Tips for Start-ups” by clicking here.