Sales Force Dynamics: Instituting an Ideal Compensation Plan

by James D. Roumeliotis

Sales compensation is a crucial factor in motivation. It is the sales executive’s best strategic tool to drive sales performance and motivate specific selling behaviors. When designing sales compensation plans, one of the most important steps is to identify the appropriate measures on which your sales representatives will be paid. A combination of salary, commission and bonus is usually most effective. The question then becomes how to successfully blend all three that will entice achievers, as well as reward them according to performance. Nevertheless, the plan needs to be kept as simple as possible.

The total compensation mix: what does it entail?

Total compensation depends on the complexity of the sales person’s selling tasks. The mix between performance and fixed pay depends on:

1)     Balancing salesperson and company needs;

2)     The type of salesperson you want to attract;

3)     The salesperson’s influence on the sale;

4)     The type of product or service sold; and

5)     Rewarding the salesperson’s specific actions or results most important to the company’s success.

Sales force compensation involves not merely salary, commission and bonus but also fringe benefits and reimbursed expenses – though these last two are considered non-compensatory since they are not influenced by sales results.

An ideal compensation plan should:

YOU CAN READ THE REMAINDER OF THIS SUBJECT MATTER IN THE BOOK “ENTREPRENEURIAL ESSENTIALS: UNCONVENTIONAL BUSINESS WISDOM AND BOLD TACTICS” – TO BE LAUNCHED/PUBLISHED IN EARLY JUNE 2012.