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Nine Keys to Sales-Compensation Design
By John Kypriotakis
Are your sales low? Margins thin? Do you experience high turn over in your sales department? Have you considered you sales compensation plan as a cause for some of your problems? If you haven't, you should.
One point before we get started: Sales compensation plans are not a substitute for good sales management. You need to have both.
Here are nine keys to properly designing a sales compensation plan:
- Assess your needs. If you already have a plan in place,
evaluate its effectiveness. Does it contribute to the
accomplishment of corporate goals? If not, what needs to change?
- Set plan goals. What do you want this plan to achieve?
Growth. Service, quality, profitability, customer focus? Your
plan should not merely address short-term financial issues.
- Define the sales reps' role. What role do sales reps play in
finding, cultivating and keeping customers? What challenges do
they face?
- Establish the pay range. Determine what you can afford to
pay and how competitive you want your pay structure to be. Where
have your current reps come from? Where do those who leave go?
Answers to these questions will provide insights into some of
the most basic elements of your sales compensation design.
- Design the plan. Make it understandable, equitable,
flexible, achievable and measurable. Although "simple" is good,
if you're not careful you can be "simply" wrong. Sales reps are
likely to embrace a plan that is realistic, free of caps, based
on performance factors they can control and guaranteed not to
change midstream.
- Test the design. Using previous actual performances and/or
projected performance, test how close your new compensation plan
comes to your pay strategy. Modify if necessary.
- Train the administrator and manager(s). How well they communicate the new compensation plan to sales reps, will greatly contribute to its success.
- Communicate the plan. Be prepared, be open, and follow up
promptly with answers to unanticipated concerns.
- Implement and monitor the plan. Set frequent meetings with the sales manager(s) and the plan administrator to review plan performance. Use their observations to fine -tune the plan for the following year. Make immediate changes only to correct major design flaws.
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John Kypriotakis is President of Lysis International, Inc. a Tampa based sales management consulting firm specializing in Sales, Marketing, and Customer Service.
Phone 813-792-8500 - E-mail: need_info@salesandmanagement.com
