2235: Personal Selling and Sales Management class was delighted on November 29, 2021, to have a chance again to host Dr. Frank Cespedes from Harvard Business School, an expert in Relationship Marketing and Sales and the author of the newly released bestseller book Sales Management that Works: How to Sell in a World that Never Stops Changing (Harvard Business Review Press, 2021).

Dr. Cespedes emphasized that individual sales performance is wide in most firms: the top 20% of sales force often generate 3-4x the revenue of average salespeople in that sales force. Incentive compensation needs to recognize these differences. He suggested these principles for designing an effective sales compensation plan:

• The compensation plan should support sales management, not try to be a substitute for management. Compensation is always connected to motivation and performance metrics in an iterative process.

• Focus on key sales tasks and how the salesperson (versus marketing, product, or another business activity) makes a difference with buyers. To do that, assess the customer conversion funnel, use data to highlight cause-and-effect links in that funnel, think beyond compensation about other activities that free-up time for salespeople to focus on where they make a difference.

• Place compensation in perspective: an effective incentive plan is typically a necessary but not sufficient cause of desired behavior. Management needs to manage the future in its market, not the past.

He also emphasized that Sales is at the crossroads of many disciplines, including economics, psychology, and buying behavior, among others. It’s not easy to teach, but it is essential in any business because enterprise value is ultimately created or destroyed in the marketplace with customers. Dr. Cespedes’ final message for the students was that while compensation receives a lot of attention, research indicates that ongoing coaching has a more significant impact on actual sales performance.