Factsheet; The Dangers of an Ineffective Sales Motivation Scheme

Business problems are sometimes not visible at once. And especially when we are talking about sales organisations, such problems show up with delay. Unfortunately the damage is already done!

Designing a sales compensation plan is an important and responsible work. Not only because a company relies on it to drive sales people to achieve targets but also to avoid unpleasant situations.

What I call as “ineffective” sales motivation scheme, is the one that doesn’t drive sales people towards behaviours we want. The dangers of an ineffective plan are a lot and undesirable.

Design your company’s compensation plan with care, think about every single aspect of it, from the terms and conditions to its operation. Only then you will minimise the risk of having a scheme that is…ineffective!

Analysing Sales Compensation Schemes: The Performance Distribution Graph

Analyzing Sales Compensation Schemes: The Performance Distribution of Sales People

The idea of motivation scheme is a simple one; either positively or negatively, its actions and inactions affect the performances of sales. It is a myth to think it only affects sales positively because it might as well have adverse effects on the sales force. 

Although determining the needed percentage to be paid need to the thoroughly thought, the scheme is quite simple to implement afterwards by just paying the agreed rate to each salesperson. However, the adverse effects might be difficult to solve depending on the size and damage. This further shows that motivation scheme is not some simple arithmetic that can be handled by the majority. It needs capable hands and professionals.

In previous sections, we have discussed the various technical plans that form the sales compensation scheme. The needed criteria that make the system needs to be given proper analysis before implementation. Eligibility of salesperson, amount to be paid, the type of incentives to be utilized and salaries to be presented are some features that form the design process.

Why is analysis important?

How many percentages is perfect for the incentive scheme? How best do sales management know the effectiveness of the scheme? Is the chosen payment rate feasible of a long-term scale? How do you quantify results? When is a result tremendous or otherwise?

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The importance of stress testing the commission system

The vast majority of organizations dedicated to sell either products or services through their sales-force employ a sales compensation scheme in order to stimulate salespeople and keep them motivated to perform at their highest levels.

Financial means are required as these compensation schemes consist mostly of a monetary reward for successful actions such as closing a sale or contributing to the success of the company otherwise.

Budgeting these financial rewards and staying aware of the implied costs is a must for the organization, no matter if these precede a monetary gain. Depending on the size and overall success of the company, these can amount to significant sums of money.

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