It's important to keep sales teams motivated, especially during times in which a company relies on these individuals to drive additional revenue. That said, it's a critical mistake to get overzealous and spend too much on incentive compensation programs. As Business Management Daily notes, some companies can get into serious trouble by spending hundreds of thousands of dollars they don't have on poorly planned compensation initiatives.
So what does an effective sales management program look like? There are six steps needed to create an ideal compensation initiative: Establishing objectives, outlining a strategy, measuring performance, establishing a budget, administering the program and analyzing success.
The six steps
1. Establishing objectives: What are your organization’s goals with incentives? Are you trying to drive sales or give key salespeople recognition? Being able to precisely pinpoint your company's exact objectives is pivotal to deploying an effective incentive program.
2. Outline a strategy: Incentives can be deployed in a variety of ways. Companies can provide compensation for sales to one person, a duo of sales people or entire teams. Being able to identify the strategy that will be put in place is crucial for success.
3. Apply metrics: Salespeople need to know how they will get paid – this incentivizes them to push certain products or obtain specific goals. Knowing specifications and requirements will enable them to better plan their pitches and engage prospects.
4. Know the budget: Compensation plans are effective for driving revenue, but they can be overly ambitious and cost companies a significant amount of profit if they aren't carefully planned. Budgets can either be open-ended or fixed, but either way, organizations need to plan for the amount of money they spend on incentive compensation management.
5. Program administration: Simply designing an incentive management program can be complex, while actually implementing and administering it is a process in and of itself. These programs don't run themselves, and companies may want to consider leveraging a third-party organization to assist with the management of the initiatives.
6. Take a second look: Once a program has been implemented, companies can begin to take a serious look at their initiatives. This will help them determine what is effective and what isn't as they begin to form an incentive compensation plan for future years.