One critical function of a sales compensation scheme is to measure the success of your sales force and check whether they are meeting business targets. To this end, you need to set effective sales goals and performance objectives and keep a running tally of who is meeting them.
Sales goals should be clearly defined and achievable, but they also need to be challenging enough to motivate sales reps to work hard to reach them. To set effective sales goals, you’ll have to answer questions such as:
- What are the metrics that best reflect sales performance in our company?
- What are the various dynamics that impact a sales rep’s ability to achieve these goals?
Small businesses can benefit from simple incentive planning. This can include comparing each sales rep’s goals with their historical performance, and reviewing the territories that are being asked to generate the highest and lowest levels of growth.
But while it’s always good to keep your goal-setting calculations simple, they must not be simplistic. For example, a goal that requires each rep to grow sales 10% annually may be easy for the reps to understand, but may not be fair if the reps work in very different selling environments.
Finally, you should also set performance goals on the more qualitative elements of selling:
- customer relationships
For example, if you have a star seller who is also a lone wolf, you could ask them to enrol in a training programme to help improve their ability to work on teams. Or you could ask an experienced salesperson to mentor someone on their team or join a new product development strategy committee.
Communicating with your sales staff about performance metrics is also key. We suggest publishing performance scorecards on a regular basis. Realising the value of accurate and timely reporting has led to more and more companies adopting web-based solutions that calculate performance and communicate sales incentive earnings via user-friendly reports.
The publication of sales compensation scorecards, if designed and delivered well, can be an eagerly awaited event each month. Scorecards can keep the sales force on track and provide just the right amount of motivation to close the next deal or break into a new account.
If you missed my previous articles on the subject of sales compensation plans, catch up with them here:
- Setting up a sales compensation plan
- Choosing a sales compensation formula
- Implementing your sales compensation plan
For more information on any aspect of sales compensation, contact me on 020 7099 2621.
About Terry Irwin
Terry Irwin is the founder and CEO of TCii Strategic and Management Consultants. Born and brought up in Wales, he studied Economics and Marketing at university, followed by an MBA.
Before setting up TCii, Terry spent over 20 years in the corporate world with GSK and Henkel, managing consumer goods and services businesses, living in 14 different countries and working in 30 in Europe, North America, Asia and the Russian Federation. He has also served as a UK Director of Carphone Warehouse and as a Non-Executive Director of Holt Lloyd.
Terry has consulted for a wide range of businesses, from multinationals to start-ups and growing organisations. He has a “hands on” approach and stays involved with client projects through to the achievement of agreed results.
His areas of expertise include:
· Business and strategic planning and implementation
· Business turnaround, outsourcing and cost reduction
· Acquisitions, mergers and post-acquisition integration
· International trade and distribution
· Venture capital
· Exit strategy
· Organisational development
· Succession planning
· Board-level executive coaching
· Sourcing key people – both executive and non-executive – for clients.