Questions You Have To Answer About Your Sales Compensation Plan

by on June 15, 2009 · 0 Comment POSTED IN: HR Info Center

Know what you want to achieve with your sales compensation plan

But here are some of the questions you’re going to eventually have to address in your sales compensation plan. What does the market pay for total target cash? What the mix should be? What type of people do we want to attract and retain? And this is really kind of critical for the sales area. When devising your sales compensation plan, put the type of people or types of jobs in the sales area on a continuum.

On one side you have the hunters and on the other side you have the farmers. Now, the farmers are the guys who generally sell to existing customers. It’s an easier sell.

They’re paid differently than the hunters who actually go out, and as the term may imply go out for red meat, meaning they’re actually going out and looking for brand-new customers. That’s a more difficult sell. And they’re paid differently than farmers.

You also will be faced with these kinds of questions — what do we really want these people to do to make the sales compensation plan work? It speaks to how the sales function is actually organized and how we are going to make sales. For example, there’s been a huge up take in the use of inside sales people. Hear it lightly, a lot of sales forces are trying to use the telephone to make sales rather than getting feet on the street.

What’s the sales cycle? Is it long? Is it short? It depends on the product. Generally, are you selling a business solution or a particular product? And how much selling is really required? In some organizations, sales people who have a long history with their customers are simply taking orders and not really selling that much. It has a bearing on how these people are paid.

And then what’s your balance between existing and new customers going to be? And are there products and services that are more profitable than others because there’s only one thing that’s better than increasing revenues and that’s increasing profitable revenues.

So, that’s a long list of questions but in fact, only represents some of the questions you’re going to have to pose and answer to design a successful sales compensation plan that will fit your organization.

Edited Remarks From “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri

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