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Sales Compensation

Sunday, July 12, 2009
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Pay people according to your revenue strategy, not just based on revenue results

Do your long-term goals get sacrificed to make bonus in the short-term? Sales Compensation is one of the most important elements of developing a successful sales force. In order to retain the best sales force, your sales compensation plan must be competitive. Sales compensation plans have been shown to have an impact on salesperson turnover rates and activity levels. Typically, an experienced salesperson will be looking for the best sales compensation package and benefits. However, not all salespeople are "coin-operated"--and you probably don't want them to be (especially if that behavior is detrimental to customers).

Think about it:The compensation of your sales force is a vital part of developing your sales force, whether you like it or not. But how often does your compensation line up with changing your sales force behavior to achieve your long-term revenue strategy?

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If your business is serious about wanting to recruit an excellent, proven sales team with leadership capabilities, you might consider including the following items in your sales compensation structure.

  • Percentage of salary (50 70%)
  • Percentage of commission (30 50%)
  • Bonus for individual performance
  • Bonus for teams performance
  • Monthly, quarterly, or annual incentives

Whatever you include in your sales compensation package, make sure it motivates your sales team to obtain the desired business outcomes. If your sales package is unbalanced, it could be non-supportive of the sales competencies you look for to drive performance.
After designing the right compensation structure, make sure you have a system in place that can track sales and commissions accurately. Review weekly reports and keep each sales person apprised of his or her individual goals if they are off track, or praise them for exceeding their revenue for that period. Encouragement and positive feedback go a long way.

When your company has a successful compensation package and excellent IT tools put into place for tracking revenue and meeting goals, everyone prospers.

About the Author
The Association for Talent Development (ATD) is a professional membership organization supporting those who develop the knowledge and skills of employees in organizations around the world. The ATD Staff, along with a worldwide network of volunteers work to empower professionals to develop talent in the workplace.
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