Many companies struggle to put together incentive programs that truly focus their sales team on producing superior results without getting them into financial difficulties. Sales commission programs, bonuses and other recognition programs are a very difficult topic because oftentimes, the conditions under which incentives were originally set change over time. Its very important that if youre going to develop an incentive program for your sales people that you make it subject to change on a regular basis. Why? Because your business conditions change and the parameters around which you want to incentivize your people will change as a result. Sales commissions, bonuses and other forms of incentive compensation are programs that should never be viewed as entitlements by your sales people. If they become entitlements, you havent kept the program fresh and aligned with the requirements of your sales territory goals and plans. Its very important for that reason that they be reviewed and renewed or changed on an annual basis with your people. Sales commissions are probably the most popular and typically they revolve around the idea of paying your sales representative a percentage of the revenue or gross margin that comes from each sale. Sales commission programs are different from sales bonus programs which revolve around receiving a certain revenue target or other milestones. The difference between a percentage and an absolute amount is an important distinction, because a sales commission has the potential danger of allowing your sales people to make a lot more money then you originally had ever intended. Weve seen lots of companies who have reps that are making too much money in relationship to the amount of actual value they are bringing to their firm. This breeds complacency and an entitlement mindset. Its important for sales incentive programs to be reset on a regular basis, in conjunction with fiscal year planning. |
