The Right Carrot Is your compensation plan keeping your salespeople motivated?

You need a sales force that's motivated to pad theirpocketbooks by moving your product. Structuring a compensation planis critical to attracting and retaining sales professionals whosesuccess will enhance your bottom line.

Designing an appropriate compensation plan depends on whatyou're selling. "The standard rule is that the morepersuasion needed, the more commission [and] less base will beinvolved," says Brent Longnecker, executive vice president ofResources Connection Inc., a Spring, Texas, firm that specializesin 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 partnerwith an expert, let them learn a lot about [your] business andsales process, and have them propose a few different compensationalternatives."

Secrets toSuccess
Jerome Colletti, managing partner of management consulting firmColletti-Fiss LLC in Scottsdale, Arizona, and co-author of Compensating New Sales Roles: How to DesignRewards That Work in Today's Selling Environment(AMACOM), recommends three key principles of designing a salescompensation plan:

1. Design the plan for the job, not theindividual. Too frequently, entrepreneurs are attractedto a "type" of salesperson (such as one who sells oncommission) rather than considering the characteristics of theselling situation. Focusing solely on people instead of on the jobis the difference between hiring a few "rock star"salespeople and putting together a scalable sales force that canleverage the business.

2. Keep plan mechanicssimple. A limited number of measures (no more thanthree) and simple formulas make a plan easy to explain andunderstand. One of the goals of any plan is to direct, motivate andreward the desired behavior-and that's not possible ifsalespeople don't understand the plan.

3. Make it pay for salespeople tooverachieve. If the target incentive opportunity(commission or bonus) is $50,000, then, assuming profit margins andtalent retention will support it, the upside should fall in a rangeof two to three times the target ($100,000 to $150,000) foroutstanding performance.

Salary.com is a Web-based recruiting company that providesbusinesses with compensation evaluation tools. Bill Coleman, seniorvice 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. Knowhow long it will take to close a sale and how much time and effortis required per sale.

• Select a fair commission. Whether it's a percentageof pay, a percentage of sales or a target dollar amount, propercalibration of your sales plan is crucial.

• Don't neglect base pay. Use market information toensure your base pay levels are competitive. Salespeople live onbase pay until their bonuses are paid-so if pay is insufficient, afew bad cycles could send your salespeople elsewhere.

• Revisit, revise and reset. Your business, your strategyand the economy will change with time. The plan should be flexibleenough to change in stride.

• Encourage cooperation among salespeople. Sometimes itmakes sense to give credit for an assist-that way, salespeople canbring in the best person for a particular deal without losing thecommission.

Kimberly L. McCall is president of McCall Media &Marketing, a business communications company in Freeport,Maine.

Contact Sources

• Colletti-Fiss LLC
  (480) 483-1480, www.collettifiss.com
• Resources Connection Inc.
  (281) 378-1360, www.resourcesconnection.com