Incentive plans that motivate sales professionals and others at the office are an important undertaking for a manager. If they're designed well, the team is driven and a company can reap the benefits.
The flip side of a plan that's not clearly thought out, however, can wreak havoc internally. Imagine the ripple effects of diminished levels of trust, low employee morale and weakened profits, if a plan is too complicated or not achievable.
Fairness is a critical factor. Some companies use salary ranges that are discounted below compensation ranges for other professionals in their organization when sales people are eligible for an incentive plan. The other individuals may be eligible for a reasonable bonus at year-end based on company results.
This levels the field, and also rewards sales professionals to pursue the goals or targets outlined in their plans.
Plan structures can vary widely, of course, among companies based on their needs and objectives. However, as business rapidly grows, and/or as new products launch, some organizations divide their sales staff into two teams to give individuals a singular focus and a chance to achieve the best results.
One team may focus solely on acquiring new customers, while the other manages current clients with a mission of retaining and expanding their business.
Incentive plans need targetsAngie is a team leader of four business development professionals that sell prepaid products. Their focus is on increasing sales within an existing base of retail customers. Their incentive plan has several targets.
Examples include better sales volumes and better shelf placement in certain retail stores. There are also profitability targets set, so that customer inventory is properly managed to prevent overstocking in stores. This helps prevent write-offs of excess inventory and makes the customer relationship that much more profitable.
Since each component of the incentive plan is directly tied to at least two of Angie's company's business objectives, incentives are more closely tied to actual results.
The complexity comes in properly setting each target, so that both the company's growth goals are achieved and sales people are motivated to go for it.
Scheduling reviews of the plan's design with appropriate team members in finance, legal and human resources helps provide balance and close any loopholes that may exist.
Remember, any company should reserve the right to modify a plan in the future, if need be. What works well for a firm one year, might not remain the right strategy forever.
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