The need to have a strategy is essential in running a business. Whether short or long term, the strength of the company depends on the viability of the strategy. This fact is one all businessmen need to hold close to the heart to succeed in their venture. In a dynamic setting, the plan should be flexible enough to accommodate new goals showing new paths to achieve those.
Top executives in the organization meet and strategically decide the best one for the company. The various departments present how best the strategy works for them, and they all approve on one that is beneficial to all. The strategy must touch all the business areas, and its impact must be felt in all corners.
Incentives plan as a Management Tool
The sales management is tasked on achieving the set goals of the company; they are charged to implement it to success. Various management tools, which include sales incentive, can be used to achieve this objective. The sales teams under a leadership shall table the strategy and identify the best tools that work best for the company.
Incentives plans are not meant to be the only tool used to drive sales behaviour, and this is where some companies err. Changing commission plans to solve issues like; losing market share, high salespeople turnover, and underselling a product; might be enough. A sales compensation plan is not the only tool for managing salespeople; it is, in fact, an additional tool, not the first solution. However, a sales incentives plan can also be used to support sales initiatives.
Align the sales compensation plan to the company’s strategy
Let’s see a brief illustration, shall we? Assuming a salesperson is charged with a target making $200,000 worth of sales annually. This means anything short of the figure implies that the salesperson is short of the goal. The primary aim of the company is to increase revenue while the salesperson work to hit the target to claim the compensation plan. The financial motivation for success pushes her to go all out to make the figure. The company can further boost her morale by setting payment scheme for each level of success attained.
This illustration defines the need for a compensation plan to align with the company’s strategy. It guides the management on the proper methods to make salespeople concentrate. Since the focus is on increasing the company’s revenue, this will go a long way. The technicalities of a system require that the motivation plan motivates salespeople towards specific sales behaviour. Taking note of all the technical factors, performance measure will be used to decide whether the target is “hard” or not for the salesperson. The system works better with these technicalities, and the result is always positive.
Keep what is vital for you as part of the target system you set
Having salesperson perform additional tasks; for example, selling another product; without any change to the motivational system (no new incentive) dulls morale. Because no extra credit or income to her, there is a high probability the salesperson might not put in the extra effort. All agreements in the motivational scheme should be properly scrutinized.
Is there a solution to this? Well, there is. Some principles must apply like the measures must be simple, must be quantifiable, have significant weight to the system so each matter to salespeople. The measure must be a particular one that seeks to improve revenue and profit margin. Although these might come in different formats, they are all aimed at a goal.
Where is an organization missing the point?
Is the strategy in line with the company’s objectives? Is the measure quite easy to use? How can the measure bring in a new revenue stream to the organization? How can they better the customer service towards new and existing customers? Can the company work towards a marked direction? Will the strategy be enough to achieve the objectives of the company?
If this is the situation of your company, you should consider taking these steps;
1. Strictly follow the primary strategic goal of the commission scheme even when it’s complicated.
2. Sometimes, it is better to prioritize when it can’t all be done simultaneously. The company should make a priority list of the objectives and have the incentive design team to assess its implementation.
3. Don’t use unquantifiable measures even when the direct one is unavailable.
Unfortunately, sales behaviour in competitive markets is driven by financial means. Therefore, it is a lousy step not to align the company’s objectives with the incentive scheme. It is a risk that could be disastrous. Sales behaviour follow the trend of the applied incentives and salespeople jump on it because they see it as an opportunity. So, it is recommended to align the company’s strategy with the incentive system.