You need a sales force that's motivated to pad their
pocketbooks by moving your product. Structuring a compensation plan
is critical to attracting and retaining sales professionals whose
success will enhance your bottom line.
Designing an appropriate compensation plan depends on what
you're selling. "The standard rule is that the more
persuasion needed, the more commission [and] less base will be
involved," says Brent Longnecker, executive vice president of
Resources Connection Inc., a Spring, Texas, firm that specializes
in finance, accounting and human resources.
In structuring or restructuring your sales compensation package,
consider calling in an expert to help you cover all the bases.
According to Longnecker, "The best way would be to partner
with an expert, let them learn a lot about [your] business and
sales process, and have them propose a few different compensation
alternatives."
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Secrets to
Success
Jerome Colletti, managing partner of management consulting firm
Colletti-Fiss LLC in Scottsdale, Arizona, and co-author of Compensating New Sales Roles: How to Design
Rewards That Work in Today's Selling Environment
(AMACOM), recommends three key principles of designing a sales
compensation plan:
1. Design the plan for the job, not the
individual. Too frequently, entrepreneurs are attracted
to a "type" of salesperson (such as one who sells on
commission) rather than considering the characteristics of the
selling situation. Focusing solely on people instead of on the job
is the difference between hiring a few "rock star"
salespeople and putting together a scalable sales force that can
leverage the business.
2. Keep plan mechanics
simple. A limited number of measures (no more than
three) and simple formulas make a plan easy to explain and
understand. One of the goals of any plan is to direct, motivate and
reward the desired behavior-and that's not possible if
salespeople don't understand the plan.
3. Make it pay for salespeople to
overachieve. If the target incentive opportunity
(commission or bonus) is $50,000, then, assuming profit margins and
talent retention will support it, the upside should fall in a range
of two to three times the target ($100,000 to $150,000) for
outstanding performance.
Salary.com is a Web-based recruiting company that provides
businesses with compensation evaluation tools. Bill Coleman, senior
vice president of compensation for the Wellesley, Massachusetts,
firm, adds these ingredients for designing a good plan:
- Remember the customer. Treating customers well before,
during and after the sale is a wise investment.
- Account for sales cycles when designing the plan. Know
how long it will take to close a sale and how much time and effort
is required per sale.
- Select a fair commission. Whether it's a percentage
of pay, a percentage of sales or a target dollar amount, proper
calibration of your sales plan is crucial.
- Don't neglect base pay. Use market information to
ensure your base pay levels are competitive. Salespeople live on
base pay until their bonuses are paid-so if pay is insufficient, a
few bad cycles could send your salespeople elsewhere.
- Revisit, revise and reset. Your business, your strategy
and the economy will change with time. The plan should be flexible
enough to change in stride.
- Encourage cooperation among salespeople. Sometimes it
makes sense to give credit for an assist-that way, salespeople can
bring in the best person for a particular deal without losing the
commission.
Kimberly L. McCall is president of McCall Media &
Marketing, a business communications company in Freeport,
Maine.
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