The premise is logical: if you know what steps it takes to make a sale in your industry, why not reward salespeople for following those steps?
At Electronic Systems Personnel (ESP), a $2-million executive-search firm in Minneapolis, about 20% of the compensation package of a new sales hire is activity based. ESP tracks three activities weekly: daily calls to potential job candidates; company visits; and "balls in the air," or leads that could convert to sales. CEO Bob Hildreth used ESP's best salespeople as a benchmark for his activity list.
A salesperson who meets the goals can earn, on top of salary, up to $400 a month in bonuses. Placing an average of 30 calls a day reaps a $100 bonus that month; making three company visits a week also nets $100. One to four balls in the air weekly is good for an additional $100. Doing all of the above brings in another $100.
Hildreth admits it's a risk, but a calculated one. The six reps who followed the regimen are still with ESP, billing about 66% more than the industry norm. Part of the reason? The program gave sales training more focus and new salespeople more confidence. Making 30 to 40 calls daily "really helped establish a network, which gave me lots of referrals," says fifth-year salesperson Kim Downey. She graduated to straight commission sales after two years.
Caution: if you rely on one or two experienced salespeople to bring in revenues lickety-split, ESP's system isn't for you. But activity-based pay can work wonders for growing companies with a track record.* * *