| It is said that the sales person's mind works | | | | * If you keep track of the progress of your sales |
| faster and more accurate than a super-computer | | | | people working their "pipelines" to develop new |
| when it comes to calculating their incentive | | | | customers, AND you don't have the budget to |
| payments. They know how to reach their targets | | | | reward "effort" only, give sincere praise and |
| and optimise their pay by taking the most | | | | recognition in your weekly, monthly or annual |
| efficient of all actions. | | | | sales meetings. Who says incentives must always |
| Yet, despite all the incentives that companies give | | | | be monetary-based? |
| their sales people, there are still some chronic | | | | Compensating Sales Managers |
| problems faced by most sales forces, such as: | | | | Traditionally, sales managers are paid: |
| * Selling low margin items and foregoing higher | | | | * Either by a direct over-ride on the sales |
| margin ones, since it's easier and a lot faster to | | | | achieved by her team; |
| sell; | | | | * Or with a bonus upon achieving or exceeding |
| * Pushing products rather than providing solutions | | | | the team's annual sales targets |
| that will deliver long-term benefits to customers; | | | | Given the changes in the sales team's incentives |
| * Selling to the same customers and not doing | | | | mentioned above, sales managers' compensation |
| enough to develop new ones; | | | | would have to be modified a little as well, for best |
| * Communicating with the same, singular contact | | | | results. |
| in the customer's organisation most of the time, | | | | If sales people are no longer paid according to |
| and not taking the initiative to develop more | | | | just the amount of sales they bring in, then |
| relationships with more people; | | | | managers should also have more sophisticated |
| * Making lots of customer visits that eventually | | | | ways measuring (and paying) for performance. |
| produce little results etc | | | | Besides sales turnover, sales managers can be |
| While a lot of training has been conducted to | | | | measured by a combination of 2-3 criteria, which |
| enable sales people overcome the above issues, | | | | may include: |
| their behaviour still remains very much the same. | | | | * Sales turnover/ gross revenue; |
| Now that we are all in economic winter, budgets | | | | * Maintaining a certain level of margins; |
| and time for sales training are likely to be slashed | | | | * Sales of products or solutions that are strategic |
| further. | | | | to the company; or |
| In any case, having the right training for your | | | | * Acquisition of new customers that are strategic |
| sales force is just part of your solution towards | | | | to achieving future targets |
| better sales performance. Giving your sales people | | | | The above criteria can be measured as sumation |
| the right incentives so that they are focused on | | | | of separate factors, i.e. the manager can be paid |
| doing the right things may be more important | | | | x amount for achieving 100% of targets and y |
| than the training itself. | | | | amount for achieving 80% of 30% margins. Or |
| What Gets Paid Gets Done | | | | they can be paid in a martrix mode where if both |
| Here are some common ways how sales people | | | | or all criteria do not hit 100%, they will not get |
| are paid for their efforts: | | | | 100% of their bonus. Conversely, if both or all |
| * Commission based on a percentage of the sales | | | | criteria exceed 100%, they will receive exponential |
| revenue; | | | | rewards, to motivate them further. |
| * Bonus based on the achievement of a | | | | In an case, there should not be too many criteria |
| pre-determined annual sales target (based on | | | | to measure and compensate sales people or |
| sales revenue); | | | | managers, or they may be confused as to |
| * Profit -sharing based on gross profits or sales | | | | exactly what their company wants them to do. |
| margins; etc. | | | | Having three criteria will be a good number to |
| Of the 3 common ways, 1 and 2 are the most | | | | work on. |
| common, while some companies are beginning to | | | | Getting Them to Buy-in |
| focus on achieving good margins in addition to | | | | Expect most if not all members of the sales |
| sales revenue. Still, sales people are rewarded by | | | | team being upset when management wants to |
| the dollars-and-cents that they bring in, rather | | | | tinker with their incentives-scheme. For all you |
| than on how they can develop sustainable | | | | may know, some sales people, especially the |
| "pipelines" that will provide revenue in the future, | | | | better ones, have already make plans on how |
| and are also less prone to vicious price | | | | they should spend their commissions and bonuses |
| competition. | | | | if they work according to the existing plan. Some |
| Here's a simple example. Imagine that you work | | | | may have even borrowed (heavily) against future |
| for a company that sells computers to other | | | | earnings. |
| companies. You sell both desktop computers as | | | | However, if there is a need to re-focus and |
| well as servers. While the margins for desktop | | | | re-align the sales force's performance to your |
| computers are getting thinner by the day, if your | | | | strategic goals (especially in such unpredictable and |
| customers identify with your brand, they will tend | | | | turbulent times), then you may have to find ways |
| to buy from you. Even if they may haggle some | | | | to win their support. |
| discounts from you, but the sale is relatively easy. | | | | One thing to avoid is to announce the plan |
| However, selling servers are a little more | | | | abruptly, and force your sales people to accept it. |
| complicated. You will need to find out more | | | | That is almost a guaranteed way to lose your |
| technical details about your customers' | | | | best sales people immediately. |
| requirements, and customers are also quite | | | | The other thing to avoid is, in the event that you |
| particular about how your product performs, as | | | | do lose some of your good sales people, you |
| well as the after-sale maintenance agreements. | | | | chickened-out and revert to your old plan. Your |
| While servers are comparatively less prone to | | | | remaining sales people may have already be |
| severe price competition (than desktop | | | | accustomed to the new plan by now, and a |
| computers), it may take twice as long for you to | | | | revert to the old plan will cause more confusion, |
| make the same amount of incentive pay selling | | | | and you will soon lose those sales people who |
| servers than selling desktop computers. | | | | may actually succeed with the new plan. In any |
| Hence, it's going to be a no-brainer for you to | | | | case, if those sales people that you lost initially are |
| keep focused selling desktop computers than | | | | really good, they will not be re-joining you any |
| selling servers, even if your company needs to | | | | time soon. So a reversion of the plans may make |
| establish itself as a major seller of high-quality and | | | | management feel good, but in reality will do a lot |
| high-performance servers. | | | | more harm without any good. |
| To incentivise sales people to sell more of the | | | | If you feel there is a need to re-configure your |
| difficult products (or to difficult target customers), | | | | sales incentive plan, here are some suggestions on |
| come companies provide "spiff" for the hard sale, | | | | how to get acceptance and support from your |
| i.e. additional bonus or commission to sell the | | | | sales force: |
| hard-to-sell stuff. but this may or may not work | | | | * Tell your people the issues and challenges that |
| for you, especially in hard times. | | | | your company is facing right now, and that a new |
| In the real world, things can be a lot more | | | | incentive plan is required to make the company |
| complex, e.g.: | | | | and its sales force more competitive; |
| * Some solutions are so complex that you will | | | | * Appeal to noble motives. E,g, you can tell your |
| require the efforts of your engineers or technical | | | | sales force that if nothing is done, more jobs will |
| colleagues to help evaluate customer needs and | | | | be lost (and NOT that management will have |
| draft proposals. As such group incentives may be | | | | lower bonuses); |
| needed; | | | | * Pro-actively get feedback and inputs from your |
| * Some existing customers are simply not going | | | | sales force about their new incentive plan. Not |
| to give you significant re-orders in the near | | | | that you'll want to accomdate to all requests, but |
| future, and customer service staff may be called | | | | in doing so, your people will feel that their voices |
| to do the servicing of customers via phone and | | | | are heard. Besides, you may get some great |
| online means, and close the small deals as well. | | | | ideas too; |
| You will only be paid if you or your customer | | | | * If there are heavy resistance from some |
| service colleague identifies some new buying | | | | sectors, you can implement the new plan as a |
| needs from your customer, and you helped close | | | | pilot on those teams who are most likely to |
| the new deal. And you will get the bigger share of | | | | succeed first. That will give you credilbility and |
| the group (you and your customer service | | | | momentum to push forward your reforms. |
| colleague) incentive for the new deal; | | | | * Understand that your incentive plan is just part |
| * Sometimes it may take months if not years to | | | | (although a very important part) of how you can |
| develop new customers, or to get other | | | | get better performance from your sales force, |
| departments in your existing customers to buy | | | | and you will need better training, hiring and |
| new solutions from you. If you are not | | | | leadership for your sales force if they were to |
| compensated for the months of hardwork (which | | | | scale to greater heights; |
| may or may not lead to anything), you won't | | | | * Understand that no matter how hard you tried, |
| invest in the time and energies in it, etc. | | | | there will be people unhappy with your new plan. |
| Given the tough economic times where | | | | There may be some good people who will leave |
| companies will want to reduce (sales) costs and | | | | no matter what you do. |
| still motivate your sales people to sell the | | | | Ultimately, there will be risk in making any |
| hard-to-sell stuff, here are some broad | | | | changes, and changing sale incentive plans |
| suggestions: | | | | definitely belongs to the higher risk category. |
| * If your sales people are still pretty much selling | | | | That's probably why many sales incentive plans |
| the same stuff (low margin products or dealing | | | | are way out-of-date and do not align sales |
| with the same customers or pushing products | | | | performance to the company's sales strategy. |
| instead of providing solutions), instead of paying | | | | However, give such turbulent times that we are in |
| them the full commission or bonus, pay them half | | | | right now, it may just be a good reality check for |
| the amount instead. | | | | sales people to understand that it's time they |
| * If your sales people (and non-sales staff too) | | | | make the necessary changes for the greater |
| went through thick and thin to get the hard sales, | | | | good, as well as to make them better sales |
| pay them the full commission or bonus (but pay | | | | people for the future. |
| them as a group is it's a group offer). | | | | |