6 Steps to a Sales Compensation Program That Works

6 Steps to a Sales Compensation Program That Works6 Steps to a Sales Compensation Program That WorksSales compensation plans are the carrot that company management uses to motivate its schlussverkauf teams. Not all compensation programs are created equal. A good compensation plan will meet the needs of both the company and the sales team. A compensation program helps the company by motivating salespeople to make the sales that will help the company meet its goals. It helps sales teams by providing guidance about which sales to make and by rewarding the salespeople for doing their jobs. Plans that work well tend to share a few basic characteristics. Match Company Objectives Sales compensation plans should match up with one or mora company objectives. For example, if a companys current goal is to increase market share, the compensation plan should be weighted to pay more to salespeople who successfully take customers away from the companys competitors. As the companys goal changes, so should the compensation plan. Explain and Document The plan should be clearly explained to the sales team and should be fully documented. If a salesperson doesnt understand the rules, shes not going to succeed- which is bad both for her and for the company. If a salesperson has a concern about how the plan is structured, her sales manager should take her concerns seriously. Salespeople spend their days dealing with prospects and customers directly, so they may have a better grasp of potential flaws in their compensation than the companys executive team. Update Regularly The compensation plan needs to be updated on a regular basis. The marketplace is always changing, so a sales compensation plan that worked well last year may be out of alignment with reality this year. No one knows exactly what the future will bring, so even the best plan may need to be altered after its in place. For example, if the plan calls for selling $5000 worth of product for a salesperson to recei ve full commissions, and the product is suddenly recalled due to safety problems, its unlikely that the sales team will be able to sell as much as the plan anticipated. Remember Day-to-Day Management Sales managers can and should use compensation as a tool but it cant replace day-to-day management. Handing out rewards for accomplishing certain goals is a great motivator, but sales managers need to also take the time to work with salespeople who struggle to meet those goals. Regular training is also important for salespeople at all levels of experience. Monitor the Situation Compensation should be neither too easy nor too difficult to get. Every salesperson on the team should be able to meet his goals with some effort. Its the sales managers task to monitor the situation and use what he discovers to plan the next years compensation program. In extreme circumstances- say, if the entire sales team meets their stretch goals in the first quarter of a one-year plan- he may need to change the program immediately. Manage Expectations The compensation program should be in line with what the companys salespeople expect. A change in the marketplace or in the companys goals may result in a radical change to the compensation structure. In that case, the sales manager needs to take extra time to explain the changes, including why these changes are happening. A compensation plan is only as good as the sales goals it supports. As a general rule, the more detailed and specific a goal structure is, the better it will work to focus the sales teams efforts in the desired direction. Goals should ideally reflect both the type and number of sales that a salesperson should make. Compensation can then tie directly into those goals, regardless of the compensation program type.