| Compensating a sales force is one of the most | | | | One of the challenges facing businesses hiring |
| misunderstood aspects of running a business. The | | | | sales people is the fact that most sales |
| mistakes made in this arena are too numerous to | | | | compensation plans are poorly developed and |
| mention. Far too many businesses simply do not | | | | either over or under compensate sales reps. This |
| compensate their sales people in a manner that | | | | means that these sales people have certain biases |
| benefits both the company and its sales | | | | and possibly some resentment about |
| representatives. | | | | compensation. |
| There are many ways to compensate a sales | | | | And many sales people have had bad experiences |
| force. But choosing the right plan for your | | | | with previous or current employers altering their |
| business is a key factor in determining success. | | | | sales compensation plans, territories or customer |
| Why? Because sales activities are the life blood of | | | | base when the employer believes they start |
| most businesses. If the sales compensation plan | | | | making too much money. Having a well thought |
| fails to sufficiently motivate and reward your | | | | out and well developed plan that address each of |
| sales people, the overall success of your | | | | the issues above is critical to being able to attract |
| organization is compromised. And if the plan | | | | and retain excellent sales personnel. |
| overcompensates the sales force, profits are | | | | At this juncture it is important to dispel the notion |
| unnecessarily eroded. | | | | that people are not motivated by money. When |
| You should be concerned, at a minimum, about | | | | college business students are taught Mazlow's |
| each of the following issues when creating a sales | | | | Hierarchy of Needs, they are often told that |
| compensation plan: | | | | money is not important to people. While this is |
| Motivation - the plan must motivate your sales | | | | without question true for many people, it is rarely |
| force to high levels of performance. Equity - the | | | | the case with good sales people. In fact, |
| plan must be fair and create relatively equal | | | | experience tells us clearly that it is not true for |
| opportunities for earning significant incomes. Profit | | | | many employees, sales people or otherwise. |
| - your business cannot give away too much and | | | | One thing you will want to avoid as much as |
| must avoid falling prey to the mistaken notion | | | | possible is getting greedy with your employees. |
| that sales people are entitled to large portions of | | | | Remember that a good sales compensation plan |
| the revenue or gross profit they generate. Ease | | | | will amply reward strong performers and their |
| of administration - avoid creating an overly | | | | overall compensation could very well end up being |
| complicated plan that will be difficult to administer. | | | | quite substantial. Avoid the jealous or greedy boss |
| Easy to understand - sales people and all other | | | | or owner syndrome characterized by a feeling |
| employees have to be able to understand how | | | | that one or more employees is making too much |
| the plan works. Reward - the plan must reward | | | | money and needs a reduction in pay. This is |
| sales personnel in a manner that is consistent with | | | | almost always a very negative situation for you |
| their production. Unintended windfalls - protection | | | | and your sales force and will usually result in high |
| against paying for unearned sales (not associated | | | | turnover and low morale. |
| with effort of sales person) must be built into the | | | | There is a fair amount of psychology involved |
| plan. Recruitment and retention - the | | | | with motivating your employees. People are |
| compensation plan has to be attractive enough to | | | | people and have certain needs and wants. And |
| recruit and retain top notch talent. Longevity - a | | | | every person is just a little bit different from the |
| good sales compensation plan will weather large | | | | next one. Crafting a sales compensation plan for |
| increases in sales volume and be able to remain in | | | | people who tend to be high energy and high |
| place for long periods of time. | | | | maintenance is sometimes not easy to do. |