Give Sales People the Responsibility of Setting their Own Targets; and Reward them accordingly

Does the idea sound too disruptive?

Almost any organisation is setting sales targets in a top down way. An executive committee is deciding the next year’s organisation target and then sales management is responsible to split it and set targets for each individual sales person.

Sales management should have a process that identifies and allocates the target level for each region, vertical or even target customer. As you may imagine that for this exercise to be correct and the split of incentives fair, the company must establish tested and validated methods for target allocation.

We all know that the high turnover of sales people in an organisation has mostly to do with the incentives scheme. Either the payout, the targets or its mechanism, are usually areas that upset sales people.

Sales targets are usually one of the main reasons for sales people to leave their job.

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Sales Targets; Assigning More or Less than you Should

When it comes to assigning sales targets, we all understand this is a detailed and thorough exercise. As we analysed in previous articles, it is a process that requires the usage of certain quantitative and qualitative factors. 

Targets sometimes can deviate from the strict number that your “system” produces, by allocating to some sales people less and to others more than the ones generated by a formula. Allocating more or less than what you should is not a careless mistake as long as there is a justification behind it. 

Why though allocating different amounts to the calculated ones?

Your objective as a sales manager is not only to make the target of the team but to get the best out of your sales people in a particular moment. You don’t want to upset them but in the same time you don’t want to make things easy for them. Hence, you need to take sometimes into account reasons that cannot be factored in the initial allocation of the targets. 

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Discretionary Bonus – Does it Fit to the Culture of Sales People?

Among many different options sales management has in regards to the sales compensation plans, there are two main types (and many variations) we observe in sales organisations. 

Discretionary bonuses and structured commission plans. 

As discretionary bonus, I mean any payment that takes place to sales people that are on a decision of a sales management and is uncoupled by any quantitative measure or KPI. It can still be under them a qualitative approach, where the management can decide on the overall performance of the sales person and decide a bonus. The level of it is decided on generic and personal criteria. 

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Applying Different Sales Incentives Factors According to the Maturity of a Company

One solution doesn’t fit all..

The same applies in the sales compensation world. Every company has different needs and different objectives, so copying compensation programs from others jeopardises the chances of running a successful program

This also applies with companies that are in different phase of their growth cycle. Different motivation schemes apply to a startup compared to a company at a different growth or maturity stage. Each phase has its own objectives. As we said in many instances, a sales compensation plan shall be aligned to the plans and goals of the company. 

A company at a startup phase has the challenge to stand at its feet, get the first couple of clients and start being recognised. In a growth phase organic cash flow is the main objective, the brand is somewhat recognised, the company is looking to expand rapidly. At a later stage when business is matured, customers are already landed, there is a matured brand recognised in the market, people trust the company. 

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The Responsibility of Running a Sales Compensation Plan is Huge!

A motivation scheme has the potential to bring terrific results in terms of increasing revenues, meeting goals, and spurring the sales team to greater heights.

However, a sales scheme can also have the opposite effect. If not properly designed, a sales scheme can demotivate people, harm the sales force, and have a dramatic negative impact on the sales numbers and productivity of the company.

There are three pitfalls that managers must be careful to avoid:

  • salespeople incorrectly misinterpreting the system (this is often a problem of lack of clear communication from the management).
  • salespeople using the system to their advantage when it fits their strengths towards selling certain products, but not using it correctly at other times.
  • salespeople noticing that the system hardly adds much to their pay packet, and therefore not engaging with it.
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