Compensation strategy is a core factor that plays a role in any business’s ability to be successful. Yet, it’s a topic that often takes a backseat to other, flashier aspects of a business’s growth.
Often, when “bigger” issues arise, we tuck our compensation strategy away in the back of our minds and promise to revisit the topic when we have the time. But, that time never really comes. Maybe you make a few small tweaks and changes as you go, but eventually, you set it and forget it.
The reality is, compensation strategy goes beyond tangible benefits like salary and 401K matching. And yet, far too often companies lean on salary as their main tool to improve cultural issues like low job satisfaction, lack of motivation, and poor performance. If you’ve worked in sales or compensation for any amount of time, you already know that money alone can’t fix most things.
Today we’re exploring how psychology plays a role in developing an effective compensation strategy. And, how psychology helps sales leaders build teams that reach their true potential. Let’s get into it!
Maslow’s Hierarchy of Needs
Do you remember learning about Maslow’s Hierarchy of Needs? You know, the pyramid we all studied in Psych 101? Yup, we’re bringing that back– but this time, we’re putting a little spin on it. Or, should we say, we’re putting a little Spiff on it. See what we did there? No? Okay, moving on.
Maslow’s Hierarchy of Needs was revolutionary in the field of psychology. Up until this point in history, the primary focus of psychology was on human behavior, reactions, and thought patterns in existing circumstances. Maslow, however, looked beyond human experience and started to formulate a framework to unlock human potential and understand human motivation. Thus, Maslow’s Hierarchy of Needs was born.
Maslow’s Hierarchy of Needs is a psychological theory that explains human motivation as it relates to the pursuit of specific needs. This theory asserts that humans are hardwired to pursue and achieve the most basic needs first and then, later, move on to pursue and achieve more advanced needs.
Applying this Model to Your Sales Compensation Strategy
Although Abraham Maslow probably wasn’t considering sales compensation when developing the Hierarchy of Needs, his motivation theory still holds up today and can actually teach us a lot about cultivating a successful sales team.
Let’s take a look:
Final Thoughts About the Psychology of Sales Compensation
Sales compensation has far-reaching implications that go beyond a monthly paycheck. The right compensation structure can motivate more of the right behaviors, establish a sense of camaraderie, build confidence in sales reps, and so much more for your sales team. The wrong compensation structure, however, can be the source of a sales team’s major issues. Think lack of motivation, performance problems, lack of trust, and more.
As you evaluate your team and consider how you’re meeting their needs as a leader, consider whether your commission plan is working for you or against you when it comes to setting your team up for success. Not sure where to start? We can help.
We’ve written a 37 page eBook on the same subject and themes. In addition to the information found in today’s blog post we take a deep dive into actionable strategies and tactics used by the most successful sales teams. Check it out here: The Psychology of Sales Compensation [eBook].
Choose Spiff, the Leading Sales Compensation Platform
Spiff is a new class of software that creates trust across the organization by delivering real-time automation of commission calculations and motivates teams to drive top-line growth. With a combination of an intuitive UI, real-time visibility, and seamless integrations into current systems, Spiff is the first choice among high-growth businesses. Spiff’s sales commission software enables finance and sales operations teams to self-manage complex incentive compensation plans and provides transparency for sales teams.