Sales Compensation for Consistency   

Sales Compensation Management

Sales compensation is typically the largest part of cost of sales. A well managed sales compensation leads to well managed sales cost.


Sales Compensation for Consistency


We all know that core purpose of the sales compensation, is to drive sales productivity. Sales compensation can go further by driving consistency and improvement of different parameters related to sales performance over weeks, months, quarters and years.

We all know that core purpose of the sales compensation, is to drive sales productivity. Sales compensation can go further by driving consistency and improvement of different parameters related to sales performance over weeks, months, quarters and years. The possible parameters are:

Here are the methods OR constructs of sales compensation, which drives the consistency and improvement objectives (beyond sales productivity or revenue)

Sales performance in terms of Running average OR a period average:

One way to encourage this is to give sales bonus for an average over a period. This may not sound like encouraging consistency, because a sales person may have very high productivity in one period and very low in the next while maintaining a good average. However, the reason that averages work out well is that with a strong emphasis on averages, you will finally see a sales person will slog it out quarter after quarter.

Setting minimum sales productivity in every sub-period to calculate the sales bonus at the end of the period.

For example:

  • A sales person to sell at least one sales unit per week, over and above the sales productivity of 8 per month to be eligible for 100% sales commission. If the minimum per-week sales are not achieved, a deduction to 100% sales commission will be done.
  • A sales acceleration bonus will be given at the end of every quarter to the sales persons who provide minimum 10 sales units every month for 3,6,9,12 months. With every quarter, the sales acceleration bonus will go up by 2% of the base acceleration bonus (given at Q1)
  • A sales performance bonus for sales productivity growth for average sale per quarter (this could be in relation to the previous quarter OR to the same quarter last year).

While fixing-up the sales compensation for consistency and improvement, one has to be sensitive to the following:

The sales lifecycle:

If you have a new sales person OR a new product, placing too many boundary conditions could confuse the sales force. Therefore- place simplistic rules.

Seasonality

No point of asking for week after week consistency, if your product has seasonality around holiday seasons (like leisure and vacation industry).

Inherent sales force mind-set

Sales staff is generally wired to month-end, quarter-end and year-end syndrome, with most of the business being 'punched-in' near the end of these periods. We have seen many organizations failing to change that mind-set. If your compensation is too heavily pitched against that mind-set, you may create dissonance in your sales channel.