Sales Compensation Focus, July 2010 – The economy appears to have taken a positive turn and many companies are starting to think about growth: hiring more sales reps, launching a new product, or breaking into a new market segment. One of the first questions that is raised when a company returns to growth mode, especially if there has been significant retrenching, is, “What should we do with our sales compensation plans?”
This is a topic on which sales leaders and finance people have strong opinions. While I’ll discuss some of the nuances around the topic below, my bottom line is that most people should achieve or exceed quota.
A well designed incentive usually requires (1) a performance standard (some say quota, others say productivity expectation or goal); and (2) a good tracking and reporting system (have to keep up with it if we’re going to pay on it).
October 2009 – New research indicates that, “Eliminating sales quotas boosts company profits says Professor Harikesh Nair. In one case, the new sales compensation plan without quotas resulted in a 9% improvement in overall revenues…”
Regarding whether or not incentives actually help at all, the best piece I’ve read on the subject is Rewards and Intrinsic Motivation by Cameron and Pierce. The key points relevant to sales compensation design from the book are…