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I recently asked several sales performance related questions to David Cichelli, author of the popular book “Compensating the Sales Force“, a national expert in sales compensation and the sales compensation practice manager at The Alexander Group. He was kind enough to share his expertise with me, and to allow me to share his insight on this blog. Thanks again David for your time.
Question: Several readers end up on my blog by trying to find an answer to the pros and cons of variable compensation. You begin your book with an affirmation that ’sales compensation works’. What are your thoughts on the pros and cons - the rewards and benefits versus the risks. If it is a fact that pay for performance works, why are not all companies adopting such a system.
Answer: Companies use a wide variety of incentive compensation programs for a diverse array of jobs. Incentive compensation continues to be a mainstay of contemporary management practices. Sales compensation holds an almost legendary status as an expected part of the employment equation. However, sales compensation is a management choice. It’s neither a birthright nor a requirement. In fact, in my view, sales compensation programs are cross elastic with supervisory practices. Frankly, a well-supervised work force does not need an incentive program to be effective, and that observation is true of sales compensation. But, its use is widespread and prevalent. Almost 85% of all companies with sales personnel provide a reward program tied to sales results. A famous—if somewhat inelegant—argument was made against incentives by the author Alfie Kohn in his book “Punishment By Rewards.” But, generally, most sales management teams believe that incentives help bring focus to the efforts of a dispersed workforce…the sellers of the company.
A colleague of mine is looking for a SPIFF management solution. The solution needs to consist of the ability to manage several products, stores and employees selling the consumer level product at various competing stores. Obviously the power to produce ad-hoc reports and rigid data management are a must.
I have some history related to developing and managing a spiff program several years ago for an international office and consumer digital client but the application was custom built. This is not an option since I do not own the code and not looking for any lawsuits in the near future.
Are you aware of any off-the-shelf solutions?
Hi Robert,
Thanks for the question. Years ago, there were very few - if any - applications which could perform what you are describing, and often there was no other option than using a custom built application.
Most incentive compensation / sales performance management applications are well equipped to handle this now, but I don’t think there is a “best” solution. The best solution will be determined by which product is the best fit for your colleague’s needs: does it need to be on-demand or on premise, how complex are the spiff rules (just a flat bonus for every sales, or are there spiffs for certain combos of items being sold), how are returns handled (spiff taken back), if there are spiffs for groups of items sold together, how are partial returns handled, what is the volume of transactions, the number of reps, the number of stores, what is the budget to purchase the license / pay for the system, etc.
These systems are never turn-key solutions. They always require some configuration before they can be used. Implementation of very large and complex projects can take up to a year, and is sometimes on-going efforts. Smaller projects can be configured, tested and deployed under 2 months.
I would be pleased to discuss with you and your colleague the different options available.
Regards,
Julien