If you are paying for sales performance and create a plan that rewards people for selling product A, but product B is actually the product driving your organizational goals, then how is that going to shake out? Cascio has observed  that in viewing the compensation from strategic point of view, the companies do  the following: Compensation policy is derived from organisational  strategy and its policy on overall human resource management. Do you want to put your reps’ OTE “at-risk” of not being earned if they don’t reach their goals? Besides, many external factors  which impinge on the policy must also be taken care of Job Analysis and  Evaluation. In a growing market, an organisation  can expand its business through internal expansion or takeover and merger of  other organisations in the same line of business or a combination of both. Job evaluation (Compensation of jobs within an Organization) 4. Armed with this information, you can adjust resources and incentives to maximize the impact of your next plan. Over which time period will performance be measured? Sometimes, these are determined by external party, for example, pay commissions for Government employees as well as for public sector enterprises.

As sales compensation touches multiple disciplines – including finance, sales, HR, and the C-Suite – it’s important to invite important players to the party early in order to get everyone on board. The policy should be linked with the organisational  philosophy on human resources and strategy. A sales manager needs to design a compensation plan for the organization. Imagine if we didn’t embrace innovation, cared nothing about improving technologies, and just kept rolling each day into the next by doing the same things, with no regard for finding a better way? Your sales team has been put in place to improve the bottom line, and not just to simply sell because that’s their job.

Will there be a cap in place, or will you even decelerate payouts at some point? Companies  operating in different types of market/product having varying level of maturity,  adopt different strategies and matching compensation strategy and blend of  different compensation methods.
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The most common mechanics include commission rate, percent to goal, rank, and MBO—all of which are detailed here. Therefore, compensation management should have a provision for evaluating  and reviewing the compensation plan. You will have specific business goals for your organization that are different from any other business. How much more should a top performing rep be rewarded versus those performing at target? What are the quotas for each component? Job analysis also provides base for job evaluation  which determines the relative worth of various jobs in the organisation. However, this latter variable is more important. This is crucial, because there is nothing worse than getting deep into a quarter and having others breathing down your neck because they don't have a clear picture of the compensation plan, and didn't from the start. It only makes sense for those to be on a pay at-risk plan if they have significant control over the selling process—meaning close contact with prospects and customers, along with the ability to directly influence their purchase decisions. The best follow-up question to ask and answer for guidance here is what is the length of the sales cycle? It’s crucial you examine each and every comp plan element needed to construct programs for each distinct sales role. So keep the number of plan variables low and strictly aligned with corporate objectives in order to reduce overall compensation costs while still driving your desired behaviors. Looking back, did your sales reps “get” their plans, or did they misinterpret what you wanted them to do? On a micro level, you need to model how a plan will impact payouts for particular team members. They view the company’s performance as the ultimate criterion of the success  of the strategic pay decisions and operational remuneration programmes. For the first time, empirical sales “big data” and advanced analytics are available to help you make more informed planning decisions. Your email address will not be published. How will quotas differ by role? This means you need to think about not just how much you want to pay your employees, but what we call a “total compensation plan”- a compensation plan that includes other factors like benefits , performance bonuses, incentives, and company-provided perks like gym memberships or … After implementation of the plan, it will  generate results either in terms of intervening variables like employee  satisfaction and morale or in terms of end-result variable like increase of  productivity. Sometimes,  these are determined by external party, for example, pay commissions for  Government employees as well as for public sector enterprises.

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