Negotiating sales candidate compensation? Be careful. When it comes to talking about how much money they make, salespeople are just like rappers.
A recent headline on Bloomberg Businessweek, Jay-Z is Right: Most Rappers Are Lying About Their Money, got me thinking. The article compares the alleged wealth of 12 rappers with their actual wealth. It is very interesting to see how inflated (to say the least) some rappers’ sense of their wealth is. Then I thought…the same is actually true for salespeople.
On Target Earnings vs. Take Home Pay
When hiring salespeople, I am always cautious of the “inflated wealth” they may reference regarding their current/prior compensation. When it comes to hiring, there is one major difference that sets sales roles apart from other positions: there is no straight salary. Compensation is complicated by a base plus commissions structure that adds up to on target earnings or OTE.
OTE gives a salespeople an idea of what they can expect to make if they hit or exceed their quotas. The problem is that hitting quota does not always happen, thus the OTE is not necessarily the “take home” compensation they actually make.
Sometimes when I interview a sales candidate they harp on their OTE and insist they need a bump up from where they are now in order to make a move. I always respond by asking the question, “Did you take home your OTE this past year?” Their answer tends to weed out the candidates who think they make money from the ones who actually do.
3 Questions to Help You Get the Real Story Behind Sales Candidate Compensation
When hiring for sales, it is important that you do not simply accept OTE as a definitive answer when it comes to compensation. Instead, probe further with questions like:
- “Did you take home your OTE last year?”
- “Can you break down your quota for me?”
- Or, if they missed quota for a quarter (or year): “Can you explain to me what factors contributed to your missing quota and what you could have done differently to remedy it?”
It is not enough to simply accept target earnings and make an offer based on that. You do not want a sales person in place who consistently missed quota, or who consistently did not hit their target due to their performance. You want someone who exceeded their quota and who can show you they have the skills to back up their compensation demands.
If you are looking to hire top sales representatives you have to ask the tough questions and dig in on their numbers. Otherwise, like the rap stars, they may be spinning a story to make you think they’ve made more money than they actually did. Don’t hire someone like that for your sales team.