Top Labelssuccess factors
personal & career development
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transition to management
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Lynda Silsbee, B.A., specializes in human performance improvement, leadership and team development, performance management systems, and process improvement. Her diverse industry experience includes 21 years working with companies like Nordstrom, Genie Industries, and Vulcan Northwest.
Lynda is on the board of the Society of Human Resource Management--Seattle, is a certified Senior Professional in Human Resources, and serves as an adjunct faculty member of Seattle Pacific University in the Human Performance Improvement program. She is a gifted and natural human developer who keeps an eye on the strategic mission of her clients, while empathizing with employee needs.
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Does your sales compensation plan fail to differentiate enough between high and low performers? Are your top salespeople quitting at an alarming rate? Are incentive dollars failing to create high performance results? If you answered “yes” to any of these questions, it’s time to realign your sales compensation plan with your business strategy.
Although companies frequently change compensation plans, they rarely address the underlying business strategies that drive sales and deliver productivity. Unfortunately, this situation isn’t limited to large corporations. Many small and midsize businesses also have difficulty establishing effective plans. If your company is one of them, ask yourself these questions:
Is your sales compensation plan tied to your business plan? Tying them together will give you a better chance of achieving your business objectives. So if, for instance, you are trying to increase revenues from your current customer base, heavily reward salespeople for up-selling existing clients.
Is your plan flexible? You must be able to quickly react to marketplace changes without having to overhaul your compensation plan. So when introducing a new product or service, heavily weigh the commissions on it. This way your sales force will focus its efforts on newer, more profitable items.
Is your plan easily understood? To clear up misconceptions, explain the plan to each salesperson. If you don’t, they may spend countless hours trying to decipher it, rather then using that time to call on potential customers.
Are you providing your sales force with adequate training? It’s easy to tell people to perform a certain task, such as “go out and sell” a set number of products. But when salespeople fail to make the grade, you have to assess their skill sets. Perhaps they are unfamiliar with some of your company’s products or services or are ill-equipped to branch into a new market. Ongoing sales training should teach them how to sell into new channels, qualify leads and target the most attractive customers for your company.
Are you giving salespeople enough support? Consider the amount of time your sales force spends on administrative duties. Could it be better spent hitting the pavement? Hire personnel to handle administrative tasks, and ensure your salespeople have the right business tools, such as laptops and cell phones, to be more efficient.
Redesign your plan
From assessing your plan, you may discover it needs a major overhaul or only minor tweaks. Either way, as you redesign your sales compensation plan with your corporate vision in mind, avoid rewarding workers just for selling a product or service. Instead, require salespeople to sell those items and services that are strategically important for your company’s growth. Be sure your sales force has specific, measurable goals.
For instance, sales reps in an overnight delivery business may need to increase the density of established routes in their territories by 30%. To reach this goal, the company should increase route commissions from 2% of revenue to 3% of revenue.
Keep in mind that compensation plans typically fall apart when there is little differentiation between top salespeople and poor performers. (Fire those missing quotas if you’re confident you gave them the proper training and tools.) Finally, streamline the administration aspects by using software to track expenses and submit expense reports, and audit your plan every few years. Companies lose money as a result of inefficient or faulty compensation plans and processes.
Support your strategic vision
A results-oriented sales compensation plan needn’t be complicated, but it must support your company’s strategic vision. To ensure it meets this goal, first analyze your business and marketplace and create a strategic marketing plan. After communicating the marketing plan to your staff, you are ready to start creating a compensation plan. For assistance on this or other HR matters, please call us.