Sales Force Compensation

OCG fashions total sales force compensation programs that foster and reward employee contributions to sales growth, market share, and account penetration goals. These programs strike a balance between what it takes to motivate them and the amount and manner of resources used to motivate them.

A few thoughts:

• You need sales. Sales are the critical driver of a company’s performance, whether in its start-up, mature, or renewal, stage. Cost-cutting is a poor substitute for new revenue generation.
  Sales must contribute meaningfully to and be in alignment with the firm’s long-range objectives. Sales which merely keep a profitless facility open are at best pointless. We work with our clients and devote time to understanding their finances and business plan to set relevant measures for their sales forces.
• Once we determine the relevant sales and financial measures, we recommend that they be communicated to the sales force. As a result, our clients benefit from a sales force which not only knows what is expected of it, but also what helps their company succeed, and their influence upon it.
• Sales force compensation is about more than salary versus commission. If salary is too high, they may languish in their “comfort zone.” If commission is over-emphasized, they may sell by the numbers merely for the current quarter or year, without regard for the future of the business. Our successful clients typically look beyond, to a blend of Salary, Annual incentive, and Long-term incentive.
• Sales probably involve more than just the salesperson. The sales force may be merely the tip of the spear of a firm’s revenues. When we look closer at our clients, we frequently find a team at work behind the key sales executive, comprised of, in one case marketing staff, engineer, quality control person. As a result, we often recommend a team incentive (perhaps with differing individual award levels) for sales compensation. (In your case, of course, the team may vary from our example.)

We’ve been there and done that! To see our methods and philosophy in greater detail, download our whitepaper, How to Design an Effective Sales Compensation Program, here.

Or, get insights from our blog post, A Well-Designed Sales Force Compensation Program

Here is a summary:

Without a doubt, organizations must ensure that sales force compensation programs support critical strategic objectives.

Unfortunately, employers often don’t have a strategic sales plan in place – at least not one that’s well formulated. Creating or clarifying a sales plan is always a crucial step. Think of it as a “road map” that’s focused on sales achievement.

The sales plan should reflect several key conditions, such as:

• Market demand
• Market maturity by market segment
• Competitive conditions
• Economic conditions in the market
• Strategic objectives by market
• Types of sales effort/behaviors desired
• Current/desired sales structure
• Current/desired future skills needs