Sales Incentives Plan Design


We do not believe that any one sales compensation methodology or process will serve all organizations equally well. Therefore, we take the time to learn about your organization so that we can develop solutions that will work best for you. Consistency of the compensation approach with sales strategy and human resources management philosophy is critical.

We recommend a review of compensation strategy to assure that compensation practices are in line with sales strategy and human resources management philosophy. Development of an overall compensation strategy prevents a patchwork approach to compensation program design. It unifies compensation efforts.

PERSONNEL SYSTEMS ASSOCIATES, INC.

Employee Compensation, Performance, Human Resource Management Consultants

For information about executive compensation surveys, links to other compensation sites, compensation audit checklist, and information about our consulting services, see our home page at
personnelsystems.com

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Compensation strategy would address such issues as the following:

  • who do we compete with for sales employees

  • based on the quality of employees we desire, how competitive do we need to be in our pay practices
  • what is the proper mix of fixed base pay and variable/contingent incentives
  • what type of behavior do we want to be rewarded and reflected in pay levels (sales volume, product mix, new accounts, service, time in job, team cooperation, quality of supervision provided by management)
  • should some jobs be paid more competitively than others based on their role
  • how should we separate the job responsibilities from the person's performance in determining pay levels

Once the compensation strategy has been set, we determine what the competitive labor market practices are in salary, incentives and benefits for the sales jobs. We may look both inside and outside your industry. We may focus on local pay practices and/or national pay practices. We set a competitive base salary if salary is to be part of the total compensation package. Then development of incentive programs can begin.

When developing incentive programs, we focus on identifying the types of employee behavior and results to be rewarded as well as designing the formulas used to fund and distribute incentive pay. We believe that measures of performance should be simple, comprehensive of the employee's area of accountability, and be linked to the sales strategy.  Incentive rewards are designed to be commensurate with employee effort required and contributions made. Outstanding achievements call for outstanding rewards, average achievements call for average rewards, below average achievements call for below average rewards.

We use a top down organizational approach in designing plans. The top management incentive plans reward the top sales and marketing jobs for achieving key business objectives. Performance measure for middle management incentive plans should reflect some commonality with the executive performance measures. Performance measures for non-management employees should reflect the performance measures of their department head's. The differences between organizational levels in terms of performance measures hinges on identification of results which are controllable by the employee. As you move down the organizational ladder, the impact of the individual on company profitability diminishes so additional or alternate measures need to be utilized which more directly reflect the employee's area of accountability.

We believe that there is often a place for both team based incentives and individual incentives. We advocate the use of team based rewards when teamwork is a part of the operational strategy. When individual effort and results can be easily identified we believe that individual incentives can be very powerful motivators. Developing reward systems calls for a balance between motivational results, pay costs, and administrative ease. We strive to find the balance that is right for each client based on their resources and their culture. We realize that in today's economic climate, cost effectiveness and efficient use of staff is an important concern. We are committed to helping the client develop systems which address this concern.

Effective communication of a compensation plan has as large an effect on employee acceptance of the plan as the plan features themselves. After a compensation plan is developed, we offer support in the development of a communications plan and communications materials which explain the compensation plan to supervisors and employees.

We are proud to offer a complete performance management solution. Developing the right pay plan is just the start. Managers must also be taught how to set performance objectives and communicate performance expectations. We can provide workshops on goal setting and performance management. Generally this is followed by a few hours of one on one coaching with each manager to assist them in setting objectives. This combination of compensation and training programs maximizes the impact of incentive plans.

We will work closely with you throughout the consulting process to make sure that you understand each step taken by the consultant. This keeps consulting fees as low as possible and also assures that the company's personnel staff acquires the knowledge and skills to maintain the systems implemented.

We take particular pride in our ability to offer excellent formal and informal training in compensation technique and strategy. We believe in sharing all of our knowledge with the client. Our goal is to leave you capable of functioning well without heavy reliance on consulting expertise.

For information about executive compensation surveys, links to other compensation sites, compensation audit checklist, and information about our consulting services, see our home page at personnelsystems.com

Or, send us an e-mail with your questions.

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  SYSTEMS
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Last modified: 11/24/2004