Sales Compensation

Overview

Designing a compensation plan can be a difficult task that leads to a high performance and motivated sales force. That motivation is one of the most important keys to a business being successful and meeting company goals. Working with a well rounded, experienced team to develop a tailor made compensation plan will keep sales people and attract the best in the workforce. There is a variety of compensation plans out there, finding a unique balance to maintain a driven sales force means finding their motivation to keep their focus.

Main concepts

The monetary elements of the plan

Setting up a win-win compensation plan involves several factors. A sales strategy with business goals and a clear mission will set the precedence for what the business and sales people are to achieve. The industry a business is in will determine the length of the sales cycle. Selling a meal to restaurant patron has a much shorter sales cycle than selling a home to a family. Management will choose the area of focus for the sales team whether its growth, innovation, or maintaining current customers and in turn the sales focus will support the goals and objectives of the company. At this point a company can now decide what type of sales team they currently have or would like to assemble. Often this will correlate with the length of the sales cycle.

Structure for a company’s monetary incentives could be a straight salary, low base salary with high commission, high base salary with low commission, or 100% commission. Every business is different and expectations should be clearly communicated and set immediately so that accountability can be effectively enforced. Commissions can be formulated in a way to be advantageous to the company as well as enticing for sales people. Commission can incentivize sales people to work harder at landing new accounts or increase volume from a current customer. The harder they work the more they will see in their paycheck. While there are benefits to all approaches, one avenue may line up to the established goals and objectives.

Motivation & Incentives

Decisions have been made regarding business mission, sales focus, and monetary incentives, but that’s only half of the compensation package. In order to keep employees motivated a company may include a variety of benefits. “Incentives must be large enough to make outstanding performance worthwhile” (Schuster & Zingheim, 1986). Those incentives & benefits can include health insurance, 401K, retirement plan, stock options, or the ability to telecommute. The days of working for an organization for 40 years and collecting a pension check are virtually obsolete. Motivating the sales force with retirement may not be enticing enough but being able to telecommute may be more desirable