A truly good Sales Compensation Plan is called to keep the current salesmen and motivate them to work effectively. Moreover, the plan must be also suitable for the company’s financial opportunities, meaning that small firms may not afford large salaries and incentive payments. In one of the Harvard Business Reviews, and ideal plan is determined to be a contextual—tailored to the type of company’s business and the stage of its growth (Roberge, 2015, n.p.).
There are also some criteria that must be present in every sales compensation plan. Specifically, the plan must be simple and clear for every marketer, as otherwise a person may feel uncomfortable, spending extra time on calculating the salary he should earn or has earned. Sales compensation plan should be aligned with the company’s strategy and its main goals, so that salesmen know, for what they compete. This leads to the next peculiarity of the plan, which states that every marketer’s success should be compensated in the exact period, not postponed (Roberge, 2015, n.p.). It is also worth mentioning that a compensation plan should be updated time to time in order to satisfy needs of the business and support salespeople with desired and fair payouts.
Hereafter, since my management plan is developed for a start-up company, the customer acquisition will be developed as a first stage. Which means that all salesmen will be paid the main bonus for ‘hunting’ new customers. So, a person will get a base salary, which is fixed and granted as well as other benefits, such security and comfortable working place; he will get commissions for each successful up-sales transaction; but the main emphasis will lay on getting bonuses for finding new clients within a ‘customer hunting’ competition (Johnston and Marshall, 2013, Ch.11)
References
Roberge, M. (2015) The Right Way to Use Compensation. Harvard Business Review. Available at: https://hbr.org/2015/04/the-right-way-to-use-compensation-2
Johnston, M., & Marshall, G. (2013). Sales force management. (11th ed.). New York: Routledge. ISBN-13: 978-0-415-53462-8
Response to Tracey Powell:
I believe, the newly introduced sales compensation plan for the Fifth Third Bank will motivate its marketers not only to meet the main business objectives of the company, but also to compete fairly and with enthusiasm. As any good sales compensation plan, it will distinguish between doing a fixed task and reaching the goals set, thus besides a base salary a bonus rewarding system will be offered. And these two approaches, fixed and variable, must be balanced and clear (Johnston and Marshall, 2013, Ch.11). However, once there is no difference in salaries between personal banker I and II, it may lead to lack of interest in getting a promotion. Companies invest up to 10 percent of their revenues to increase sales compensations. Nevertheless, simply rewarding up-sales may not bring the returns expected, as it usually results in misunderstanding of the company’s strategy and mission (Angelos & Wachter, 2013). Hereby, bankers should also perform as highly qualified specialists, rather than only effective salespeople; thus, they should grow professionally and be rewarded for that in a form of higher salaries.
References
Johnston, M., & Marshall, G. (2013). Sales force management. (11th ed.). New York: Routledge. ISBN-13: 978-0-415-53462-8
Angelos, J., & Wachter, M. (2013) Boosting the Effectiveness of Sales Compensation. Available at: https://www.shrm.org/hrdisciplines/compensation/Articles/pages/boosting-sales-comp.aspx
Response to Erick Candamo:
It is a great option to implement a recognition program, which will be half-based on non-financial rewards. An offer to review salaries and bonuses once a year goes along with one of the main characteristics of the most effective sales compensation plans, which states that changing a reward system too often may be stressful for the employees and may ruin the transparency image (Johnston and Marshall, 2013, Ch.11). Nevertheless, nonfinancial bonuses may be applied limited number of times to reward the same person. As later, they will lose their value, and thus decrease their motivation power.
Sometimes, salespeople cannot control the amount of sales due to unpredictable external factors. Frank Cespedes, Harvard Business School professor, states that companies should reward accurate forecasting or market intelligence so that to motivate the personnel in case these unpredictable circumstances affect the overall amount of sales performed (Halliwell, 2015).
References
Johnston, M., & Marshall, G. (2013). Sales force management. (11th ed.). New York: Routledge. ISBN-13: 978-0-415-53462-8
Halliwell, S. (2015) 2015 Sales Compensation Trends. Compensation & Incentives. Available at: http://www.peaksalesrecruiting.com/2015-sales-compensation-trends/
