Your ability to manage company finances and make profitable business decisions depends on accurate projections for revenue and expenses. This is part of your sales strategy and is especially important for companies in new or emerging markets or industries where volatility is common. Your sales compensation plan has to fit predictably into your budget, in order to reliably support your corporate growth strategy.
Alignment is critical.
Studies show that less than a third of sales compensation plans are designed to align performance with company goals. Yet this is the only thing that makes sense. Such alignment:
- Communicates company goals and objectives so staff can stay focused.
- Ensures that sales and marketing implementation tactics rigorously support company goals, with no room for tangential activities that waste time and resources.
- Predictability allows accurate planning, budgeting and projections.
- Promotes a cohesive team atmosphere and commitment.
Rewards should reflect results.
You don’t hang onto products that don’t sell, so why keep sales people that don’t sell? When it comes to sales, results are what counts. Here are some tips:
- Significantly reward your top performers -- in line with their individual achievements.
- Penalize (or eliminate) those who don’t perform. If they aren’t contributing to net revenue growth, they are a drain on your resources.
- Avoid compensation distractions such as bonuses or one-time incentives. They rarely support company goals, and quick sales boosts are usually neutralized (or worse) by the corresponding spike in expense.
- Sales compensation that matches clearly defined, understandable goals (both corporate and sales-specific) motivates people to do their best.
When it comes to sales compensation, you get exactly what you demand. A plan that’s carefully aligned with company goals and rewards only top performance will support company growth predictably and profitably.
Editor's Note: This post was originally published in November 2011 and has been updated for accuracy and relevancy.