Yesterday, we looked at the types of employee bonuses you might wish to consider offering as well as some of the pros and cons. Today, we turn to sales team incentives, which are in a category all by themselves.
Why Incentivize Sales?
Sales team incentives generally support market strategy and business objectives, while encouraging the sales force to grow new accounts and support existing accounts. Incentives promote the entire sales force’s working together and encourage cross-selling.
Traditionally, sales compensation and executive compensation have been more complex than pay programs for other employees because both executives and the sales force have the power to affect the results of the corporation in ways that other groups may not have had. With more emphasis on complicated variable pay programs for front line employees, that may be changing. However, pay at risk generally is more acceptable and understood for sales representatives than for other employees.
Link Sales Compensation Directly to Marketing
The sales compensation program should be linked directly to the company’s marketing strategy to control outcomes critical to the company. As the marketing strategies of individual companies are unique, so are the best sales compensation programs.
Sales compensation should be adjusted periodically to support new marketing plans as the company’s product mix or product life cycles change. One of the advantages of an incentive program for sales representatives is that the company can design it to support the marketing strategy and change it as the strategy changes.
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The most important design features in a sales compensation program are the pay level (how much) and pay mix (proportion of incentive pay to base pay). Pay levels generally will reflect industry practices, but the pay mix should be designed to meet the marketing strategy of the company.
The degree of risk in the incentive program has to be balanced with the possibility to earn; the higher the risk, the more the sales representative should be able to earn by accomplishing the company’s strategic objectives as they relate to sales.
Straight Salary for Sales Reps?
A straight salary approach is most appropriate when the sales force’s main job is to service existing accounts or generate goodwill for the company. The company that has a sales representative on straight salary is engendering loyalty to that company, and the sales force’s actions are easier to control.
However, straight salary makes it more difficult to motivate employees to sell new accounts, and it may lose the company its top performers, who move to other organizations where both the risk and income potential are greater.
Bonuses and sales force pay are just one aspect of your company’s overall compensation program. Sometimes the math and metrics involved may seem daunting—but it’s not hard to master the skills with the right know-how. How to get there? Fortunately, there’s timely help in the form of BLR®’s new webinar—Mastering Compensation: How to Ace Your Understanding of Key Principles for Compensation Planning Success. In just 90 minutes, on Tuesday, August 25, you’ll join a plain English discussion designed specifically for HR professionals interested in developing a working knowledge of the principles commonly used in compensation analysis and planning.
Register today for this interactive webinar.
Math-phobic? Comp is easier than you think. Join us Tuesday, August 25, 2015, for a new interactive webinar, Mastering Compensation: How to Ace Your Understanding of Key Principles for Compensation Planning Success. Earn recertification credit for HRCI, SHRM, and WorldatWork Society of Certified Professionals designations. Register Now
By participating in this interactive webinar, you’ll learn:
- Math used to measure, track and predict compensation
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- Compa-ratio: What it is, why it matters, and how to calculate it
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- Other key compensation metrics you’ll need to know, including: market index, measures of range variability, interquartile range, and standard deviation
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Tuesday, August 25, 2015
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This program has been approved for 1.5 credit hours toward recertification through the Human Resource Certification Institute (HRCI) and 1.5 credit hours towards SHRM-CPSM or SHRM-SCPSM. It also qualifies for recertification for numerous WorldatWork Society of Certified Professionals designations.
Join us on Tuesday, August 25, 2015—you’ll get the in-depth Mastering Compensation: How to Ace Your Understanding of Key Principles for Compensation Planning Success webinar AND you’ll get all of your particular questions answered by our experts.
Train Your Entire Staff
As with all BLR®/HR Hero® webinars:
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- Get your (and their) specific phoned-in or e-mailed questions answered in Q&A sessions that follow the presentation.