From the course: Sales Management Foundations

Understanding sales compensation

From the course: Sales Management Foundations

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Understanding sales compensation

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- To create and manage an effective sales force, you must compensate your reps. The good news is that sales managers have a variety of sales compensation schemes to use. The key is to select one that is market-competitive and that drives the right behaviors in your sales reps. Compensation can affect the number of sales calls a rep makes, the quality of that sales call, and how much time a rep devotes to the job. It all depends, once again, on the sales task. Who do we call on? What products do we sell? What activities lead to success? And what interactions do reps have with others in the company? In other words, compensation can drive behavior in all four areas of the sales task. Now, creating a sales comp program takes a lot of work, so it's important to get help from others within your company. such as your finance and human resource departments. A good sales comp program is simple, fair, flexible, affordable, and, most of all, competitive. To design a sales compensation plan, start by looking at your current comp program and determine how well it's working. What are its strengths and weaknesses? Is the comp plan aligned with the strategic direction of the firm? Is the plan affordable within your overall company's business model? Is it competitive with other firms that you compete with? Is the program too volatile in terms of how reps make their money? Be sure to get diverse input when you do this assessment. You should get feedback from your senior management, your sales teams, and sales support groups, but also include feedback from marketing and other departments, especially ones that are directly impacted by the activities of sales reps, such as your manufacturing team or customer service groups. You should also assess how simple and easy it is to administer the current plan. Are there ways to streamline it and make it an even more efficient part of your overall sales management toolkit? What can you do to make it more flexible and nimble? A great sales compensation plan links all aspects of sales management. The best sales managers are the ones that take the time to design the right one for their company.

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