Commentary & Analysis
Does Your Incentive Plan Need an Extreme Makeover?
By Carole Alexander Companies compensating their salespeople in a fair and proper manner are the most profitable.
By WhatTheyThink Staff
Published: June 9, 2005
By Carole Alexander Companies compensating their salespeople in a fair and proper manner are the most profitable. June 9, 2005 -- Owners frequently ask about how to motivate sales professionals. Motivation usually includes everything from making more sales to eliminating disgruntlement and job hunting elsewhere. Since the fortunes of the business often rise and fall with the performance of the sales team, focusing here makes sense. In my experience, clear company goals, good sales meetings and effective sales management are certainly important. But the primary way a company motivates salespeople is through the Incentive Plan. Start here and consider whether your plan is doing its job. What does a motivated salesperson look like? In general, a motivated salesperson should behave exactly as you want them to. That could mean bringing in new clients, generating higher revenues, increasing profitability, selling new products, improving customer satisfaction, opening a new territory or saving customers you may lose. If your salespeople are behaving exactly as you want, your Incentive Plan is probably a good fit. If not, look closely at exactly what you are telling them, how you are rewarding them and how you are implementing the Plan. Speak their language The major way you communicate where you want your sales reps to spend their time is not through your kickoff meeting, speech from the CEO or sales meetings. Only the Incentive Plan speaks the language they love to hear. It tells the sales professional how they can make money and for which activities you will reward them. If they are highly compensated for overall sales revenues, but you really want them to focus on specific products or open new accounts--you are not communicating. If you want a team approach but do not involve non-sales in the compensation, you are not rewarding the behavior you want. Maybe you have added new services you want to be included in each proposal. Don't just talk about it. Spell it out in the Incentive Plan with appropriate rewards. Be sure the Plan is in line with the company goals and culture, so you are all pulling in the same direction. Lastly, someone who really understands selling should have the final word. It has been shown that the companies compensating their salespeople in a fair and proper manner are the most profitable. So, once the Plan is well written, stand by it. If you make a promise, keep it. Avoid territory cuts, pay cuts, compensation changes, arbitrary revisions in the Plan, creating house accounts, lowering rates of commission and withdrawing previously promised compensation. Contrary to popular myth, salespeople cannot make too much money. At the same time, build in time limits so you can change focus when necessary. Rate Yourself Does a good Incentive Plan take time, effort, energy and thought? Yes. But it saves countless hours and agonies during the course of the year in dealing with compensation-related problems. If you are not using this tool as fully as you can, think about starting now. Want to see how you are doing? Respond to the statements below by scoring your company on a scale of 1 (lowest score) to 5 (highest.) A score of 1 indicates that you don't do it well. A score of 5 shows that you do this very well and the results show it. If a statement does not apply the score is 3. Our Incentive Plan is well thought out and reviewed each year. Our Incentive Plan is consistent with our business goals, i.e. if the salespeople are successful, the company is successful. We use a thorough market analysis of compensation on a regular basis and adjust the Plan accordingly. Our Incentive Plan helps us to hire and retain good talent. Our Plan is clear and well understood regarding desired sales behaviors and rewards. We offer non-sales incentive plans to motivate those who are a vital part of the sales cycle. Management handles sales performance and incentive issues very well. When market conditions or products/services change, we review compensation to be sure the rewards are adequate and the sales team is treated fairly. Our employees would say that the company has an equitable way of handling incentives i.e. reflects employee contribution. Our Incentive program is the responsibility of Sales Management with input from all other key departments. If sales reps have new products/services to sell, they become part of the Incentive Plan. Our Plan leads the sales staff to desired behaviors and results. Total ____________ What does your score say about your Incentive Plan? Score: 0-30 Remediation is needed here. Your company is having incentive challenges and this could result in the loss of good personnel. Get busy and identify those most critical areas. Involve many departments and develop a plan to get well. Score: 31-45 This score is a mixed review. Some areas are going well, and some are not great or really need improvement. Go after those weak areas and you will see the impact on your business. It is also worthwhile to make your good areas even better. Score: 46-60 Looks like your company is doing a good job. But don't hesitate to improve further by reviewing your low scores. It can only help your productivity and success. Please provide feedback, suggestions or comments to Carole at firstname.lastname@example.org