In a recent BLR webinar, Joseph DiMisa, a sales compensation expert, outlined key areas employers should understand in order to create and implement an effective sales compensation plan.
For a Limited Time receive a
FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with
customized information for your industry, location, and job.
Get Your Report Now!"In looking at the principles of design and understanding the strategy – to ultimately get to costs – there are 10 key areas that need to be understood." Joseph DiMisa told us in a recent BLR webinar. Here are the 10 areas he outlined:
- Link to company goals. You have to understand how the sales compensation plan is linked to company objectives. The company goals must be linked into specific plan components that are controlled by each marketing, sales, and service job.
- Accountability. Hold participants accountable for results they control, but be careful not to judge someone on factors outside their control. "You wouldn’t want to measure a person on profit or revenue growth at a customer level if you can’t measure it." DiMisa explained.
- Alignment. There must be clear alignment in the plan—either with company goals and objectives, or with team results (or other parallel measures).
- Cross-selling. Cross-selling affects the ROI of the sales compensation plan. Be sure you’re not double-crediting, but are still creating and promoting positive interaction between channels, divisions, or groups.
- Pay for results. Pay for business results.
- Significance. Participants must perceive target incentive pay as obtainable and it should be a substantial portion of the total target pay.
- Simplicity. Use as few measures as possible with the simplest mechanics to increase focus.
- Differentiation. Significantly differentiate pay levels for excellence. Differentiate the top performers, even if this means their cost-of-sales is higher. (However, it will often be lower because they bring in more business in total).
- Involvement. Develop the sales compensation plan with input from the plan participants to incorporate ideas and create buy-in.
- Management and adjustment. Manage to a metrics dashboard and don’t be afraid to correct course along the way.
For more information on creating an effective sales compensation plan, order the webinar recording of "Sales Compensation Plans: How To Measure ROI to Find Out If Your Strategy Is Truly Working." To register for a future webinar, visit http://catalog.blr.com/audio.
Joseph DiMisa is a senior vice president and the head of the sales effectiveness practice for Sibson Consulting. His areas of expertise include working with companies to develop and implement direct and indirect compensation plans, sales strategies, and sales effectiveness programs.