Cambridge Business Association
The Complete Guide to Sales Force Incentive Compensation
Book

The Complete Guide to Sales Force Incentive Compensation

How to Design and Implement Plans That Work

Andris A. Zoltners, Prabhakant Sinha and Sally E. Lorimer
AMACOM, 2006
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8

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Recommendation

Planning the ideal salesforce incentive compensation program is very challenging. Pay enough, and you’ll energize your salespeople. Pay too much, and you’ll throw money away while turning salespeople into loafers who can get by on fewer sales. Pay too little, and you’ll push your best salespeople out the door. But how much is enough, too much or too little? How do you figure out the best mix of salary, commissions and bonuses to pay your salespeople? This comprehensive compensation guide is a good place to start answering these questions. Written by sales and marketing experts Andris A. Zoltners, Prabhakant Sinha and Sally E. Lorimer, this is your essential map for developing and implementing the ideal compensation incentive plan for your salespeople. getAbstract recommends it to sales managers who want to do a better job of meeting their personnel needs and, therefore, their sales targets. (Read this before you negotiate compensation with anyone else.)

Summary

Getting Sales Incentive Compensation Right...If You Can

Establishing the right sales incentive compensation plan is challenging, but it’s worth the trouble. Getting this right can help you retain and recruit top-selling talent and increase sales, which is the whole point. Alas, getting it wrong can have the opposite effect; you can lose people and sales, and injure your company. The objective is clear: create an effective compensation program. To achieve this goal, you need to take many different factors into account.

Begin with a budget and ask how much you can allocate to pay salespeople. Consider your experience and theirs to determine what ratio of their compensation should be salary as opposed to incentives or bonuses. Do you want to vary salespeople’s pay depending on performance? Do bonuses or short-term incentives emphasize achievement or do they divert salespeople from their main mission? Do cross-selling incentives work? As you establish a plan, avoid complexity. Build on past successes as you keep an eye on your future sales needs. Use your staffers’ enthusiasm for the plan as a metric that can indicate if it will work to satisfy the four reasons that companies...

About the Authors

Andris A. Zoltners and Prabhakant Sinha teach college business courses. They co-founded a business-consulting firm. Sally E. Lorimer, business consultant and writer, is a former principal at Zoltners and Sinha’s consulting firm.

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