Businesses face a number of challenges as they strive to maximize financial performance in a recovering but still sluggish economy. According to a recent survey of 55 chief human capital officers by the Partnership for Public Service and Grant Thornton, some of the leading issues businesses are contending with include a retiring workforce, outdated hiring policies and incentive compensation plans.
The last point – compensation management – was pinpointed as a particularly troubling issue. At a time when many organizations are trying to reduce expenses and costs, sales compensation management has been a major sticking point. Businesses want to incentivize their sales representatives and motivate them to do better, focusing specifically on big performers. At the same time, budgets are a real issue and the economy is lowering employee morale.
"In a climate where budgets are being reduced, employees are being bashed and people are retiring, you really do want to pinpoint your highest performers and do what you can to retain them," said Robert Shea, principal at Grant Thornton, in an interview with The Federal Drive with Tom Temin and Emily Kopp.
Companies need to seriously rethink how they are paying employees with the current economic climate in mind. Compensation plans need to make sense through the lens of a business' objectives, but they must also be lucrative to sales representatives as well, or else organizations will struggle with poor retention rates and unmotivated salespeople.
"Others interviewed said that a compensation system that gives more weight to performance would offer a positive incentive for workers to improve," Federal News Radio added. "An employee could earn more for strong work than an under-performing co-worker in the same position."
Designing the appropriate sales plan
The mistake many companies make is creating a sales compensation plan that only considers the business angle. This, however, doesn't always do an effective job of communicating what salespeople should be prioritizing and pushing.
A successful sales compensation management system involves more than setting dollar figures to items and services. It should outline the goals of a business, how these correlate to salespeople and how they are being measured and assessed, in addition to the simple compensation numbers. A well-designed plan will also have other measures in place to make it more flexible if conditions change.