So if we accept that good salespeople are primarily materialistic, we also accept that the structure of their compensation package is likely to have a significant impact on their behaviour. So for your business to prosper, it is critical to align sales incentive plans with the behaviours you want to see.
Tie Incentives to VSGO*
To put it another way, in order to encourage maximum sales performance, the sales compensation plan needs to be well aligned with the companies Vision, Strategy, Goals & Objectives (VSGO*). This assumes of course that you know where you want to go and have developed your VSGO set.
Sadly most compensation plans are either; drawn up by someone too far removed from the VSGO; or as is often the case, a poorly adapted version of a plan created in a previous era. It’s surprising how companies can so often overlook this fundamental driver for business performance.
Some Basic Examples
These may appear logical and even obvious yet are rarely implemented:
You want your salespeople to focus attention on more strategic margin rich solutions and services, leaving older lower margin ones to be sold by a lower cost resource. You could drive this change in behaviour by adjusting the sales incentive plan to encourage the behaviours you want.
Equally, your company may make more profit from value add services than it does from mere product sales. However the value add services may prove a harder/longer sell and therefore the path of least resistance to most commission may be to focus on shifting product. Adjust the plan!
Incentive Plan Development
A well designed sales incentive plan creates a sustainable win / win situation for both the salesperson and the company. It also protects the company from abuse as the salesperson can only ever benefit in proportion to the companies benefit. No company gain, no individual gain.
Sales incentive plans should never have to be capped – they should be set up in a way that encourages and rewards over-performance. When a salesperson over-performs, the benefit to their company should far outweigh any over-performance accelerators it has to pay them.
Underused Leadership Tool
As simple as this logic is, very few companies think their compensation strategy through and align it with their VSGO. Some pay commission on margin, rather than revenue and this can help, however for most the incentive plan remains a powerful, yet much underused “leadership tool”.
For further information see the "Sales Incentive Plans" page on the Perform website.
Sales Incentive Plans Drive Sales Behaviours - To learn more about this author, visit Harry Hayden's Website.
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