Seven ways to realign compensation

Show us  the compensation system and we'll predict the behavior in the organization. Building new business models means that compensation needs to be realigned. Here are some best practices among companies whose digital sales are growing at substantial rates -  more than 50% year-to-year.  

1. Overcompensate for development of new revenue streams.

Besides resistance to change, sales representatives are reluctant to pitch lower-priced digital campaigns over high-dollar print and broadcast campaigns. We think that cannibalism is largely a myth, but perception is reality in the sales department!

There are two common methods of overcompensating for new kinds of revenues that are used by ad directors we found are having the most success in the field. One is establishing multiple goals, and substantial bonuses for meeting both goals. For example, if sales representatives can make an extra 3% bonus on ALL sales by meeting both online and offline goals. Or in one case, a percentage on all revenues kicks in when just the online goal is met. 

Another common compensation scheme is to simply pay more for digital sales; Freedom newspapers is moving to this model; print sales will generate a 4% commission while online sales will be paid at 10%, to reward the development of the new business model.

How much more to incent sales representatives to sell digital? Double is generally a good number.

2. Look for ways to "redistibute", rather than continuing to add, compensation.

That is, check the overall compensation on all products and re-allocate the new percentages so that they reward the new behavior but, essentially, avoid doubling commission on new products without lowering commission rate on the legacy products. Tricky, so get the best analytical minds on this, and make sure you can prove to reps that they will come out essentially the same or ahead, otherwise the change creates a giant distraction within the company.

Example
Current $100,000 x 10% commission on Print = $10,000
New $80,000 print x 7.5% = 6,000, plus $20,000x 20%=4000;  so total commission= $10,000

One way to avoid drama is to agree first on what your "good," but not top, sales reps feel confident they can sell online based on realistic progress. In other words, make sure all your reps understand your expectations on a "number of deals of a particular size" per week or month level they are expected to close.  

3. Incent digital specialists to help teams instead of compete.

What we know here is what does NOT work, and that is, to split the commissions between the specialist and the sales representative. That's a recipe that works against team selling since the sales person only stands to lose money every time their "partner" shows up. Don't make this mistake! 

If you use specialists, the most effective approach we've seen is to have specialists assigned to specific sales teams and bonused on overall team increases in digital sales. Some also handle a limited number of personal accounts, as long as their main income comes from the team's increases. They participate in account reviews, go on calls and lead training. 

4. Bonus other supporting departments on team selling goals.

It goes without saying that if you are using retail or digital managers to support sales representatives in the field, they should be bonused on online growth.

In an increasing number of companies creative and marketing departments are reporting to revenue managers and supporting the sales effort. If marketing supports specific initiatives, say, Facebook sales or sales of newsletters and eblasts, then it's an easy to direct bonuses to the right place.

Don't forget to include performance based compensation for interactive teams who build and support niche sites, user-generated revenues or just the banner ad sales effort.

Finally, one company tracks  sales the ads that go through a formal "brainstorming" process. Increases for that collective group of accounts, since they are tracked, can be used to reward the creative team. Tracking these accounts also the feedback loop on accounts by showing creative services what the results have been, (add click-through rates and other conversion tracking and you have a great way to educate the whole team). 

5. Reallign management compensation
This is often left to last, but it is just as important to get publishers and general managers to commit to creating the new revenue streams to meet overall goals, instead of say, another special issue, or if its a broadcast site, one more high dollar promotion. Review the overall goals and redistribute them.

6. When in doubt, call it a bonus on growth.
If you are uncertain about how a compensation plan will play out in two to three years and want to avoid future distraction; try to keep the pay in the form of "bonuses on growth" even if essentially they amount to pay increases. That is if you are going to pay 4% on print sales and 10% on digital sales, Let's call that 4 percent on all sales and a 6% bonus on year versus year digital sales growth (you are starting at zero with some of your reps in most cases!). The reason being that you want to be able to alter these compensation levels more easily down the line. Even one key employee festering over a compensation change can hurt your organization, so set yourself up for future success! 

7. Use lots of spiffs!
Forget the nature of sales people at your own peril! One ad director who is getting 60% growth in his department after "redistributing" compensation said a lot of his success is due to "basic management 101": Spiffs, contests, and prizes. Employ trade for $25 lunches and other coupons, plus half days off for reps "to be the first" people to sell an important areas of the site. Within two months his team had sold 16 web ads on zones that had never been populated before. Cash spiffs are a great way to incent "first" types of contracts. 


Special thanks  to Chris Edwards, Vice President of Sales, Source Media Group; Chadi Irani, online manager PalmBeachPost; Stacey Ream, Dirctor of Advertising at the Odessa American;  Michael Christensen, Director of Online Operations for Western Canada, Sun Media and Stephen Weis, VP of Interactive, Hearst Company for sharing their expertise. 

The author, Alisa Cromer is publisher of a variety of online media, including LocalMediaInsider and  MediaExecsTech,  developed while on a fellowship with the Reynolds Journalism Institute and which has evolved into a leading marketing company for media technology start-ups. In 2017 she founded Worldstir.com, an online magazine,  to showcases perspectives from around the  world on new topic each month, translated from and to the top five languages in the world.

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