A sales force creates sales. It is not just an expense; it drives the top line for a company. A motivated sales force sells more than an unmotivated sales force.There are a number of key drivers of sales force effectiveness and one of the key components is compensation. A sales incentive plan should be developed […]
Get Instant Access to This Article
Subscribe to Hartford Business Journal and get immediate access to all of our subscriber-only content and much more.
- Critical Hartford and Connecticut business news updated daily.
- Immediate access to all subscriber-only content on our website.
- Bi-weekly print or digital editions of our award-winning publication.
- Special bonus issues like the Hartford Book of Lists.
- Exclusive ticket prize draws for our in-person events.
Click here to purchase a paywall bypass link for this article.
A sales force creates sales. It is not just an expense; it drives the top line for a company. A motivated sales force sells more than an unmotivated sales force.
There are a number of key drivers of sales force effectiveness and one of the key components is compensation. A sales incentive plan should be developed to help assure the sales force performs the right activities that satisfy customers and drive company revenue and profits. Here are seven rules for effective sales-incentive plans:
1. Alignment: The sales-incentive plan needs to align the salesperson's activities with the firm's objectives. Senior management needs to develop a strategy and goals for the organization. Sales leadership can then determine which objectives and activities will best support the organization's goals.
2. Compatibility: An effective sales-incentive program must be compatible with other drivers of sales force effectiveness such as performance management, training and company culture. The plan should target activities and objectives that are important for the business results desired. It is also essential that the plan is viewed as fair.
3. Challenging — but achievable: The MBOs (management by objectives) that are assigned must be a stretch to achieve. They should be challenging, but achievable. If the goals are too easy, they won't drive the required performance and continuous improvement. If the goals are unachievable, the sales team will give up without even trying. Goals lose their ability to motivate if the sales force feels the goal is completely unattainable, or they cannot affect the outcome. This is important to keep in mind during the rollout phase.
4. Easy to understand and manage: The plan for each person should fit on a 3 x 5 index card and be explainable in two minutes or less. Measurability is also critical to the success of a sales-incentive plan. Incentive plans will not work if the performance criteria are not measurable and easy to understand. Keep in mind there are many details that need to be considered when developing or modifying these plans, so be sure you have people with experience involved.
5. Motivating: The company benefits if the sales force is motivated and successfully implements an effective selling process. An effective plan will influence salespeople's activities and keep them energized. Salespeople like to feel that their work is recognized and rewarded. A good plan is motivating to those sales team members who are achievers.
6. Modeled and tested: Once you have developed the plans for your sales team they should be carefully modeled and tested. Your finance group should test to see what would have happened the prior year with the new plan and also what will occur on the low and high end of the expected results for the coming year. Now is the time to avoid surprises, prior to unveiling the plan.
7. Effective rollout: Changing compensation plans can be challenging. It's wise to involve the front-line sales managers during the development phase to assure buy-in. In some situations, you may also have to consider a transition period, if good salespeople will be negatively impacted. Be sure to get the front-line sales managers involved with the rollout of the new plans. You need them to motivate and coach your team through the change and ultimately towards success.
While only one component of sales management, the sales-incentive program has a significant impact on salespeople, sales activities, customer satisfaction and company results. The incentive program sets expectations of what is important and directs sales force energy to activities it rewards. These plans should be carefully developed and reviewed. It's always a good idea to get help from an outside expert to assure maximum impact for your organization. n
Andy Singer is the president of Singer Executive Development, a professional training and development company that helps optimize business performance of employees and executives.
Read more
