(2 votes, average: 4.5 out of 5)
Loading ...
In designing an incentive compensation scheme there is no one perfect design, there are however some common best practice design principles that characterize effective schemes.
Effectively implementing these seven principles will provide immediate value to the sales organization therefore we would recommend that you consider how your organization compares.
1. Clear link to strategy
Plans need to link clearly to company goals, hold participants accountable for the results they control, and pay for results focusing on margin or profit rather than volume.
2. Accurate, Transparent and Consistent
Performance should be accurately measured and a transparent and there should be a consistent link between performance and plan payout. Where possible, this process is automated to ensure effectiveness.
3. Uninterrupted flow of key strategic messages
There is an effective flow of key messages (for example growth, increasing profitability per customer, quality customer retention) from the sales strategy to sales targets to salesperson role to incentive plan measures to payout.
4. Significant on-target opportunity
Plans have an on-target payout which is significant and consistent with company/product status in the market. For example, a new product/service in a new market requires a more highly leveraged plan.
5. Promotes positive behaviors
The plan should influence sales behavior in a way that drives positive selling and which prevents negative selling behaviors.
6. Simple
A plan should be simple, using as few performance measures as possible. If the salesperson can’t explain how it works in under a minute, it’s too complex.
7. Differentiation
Plan payout should differentiate clearly between excellent and average sales performance.
This post was written by Jon Clark at Sean Culligan at OpenSymmetry’s UK office.
Recent Comments