The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work
How to design and Implement Plans that Work
Published on 1. August 2006
Book
Hardback
496 pages
978-0-8144-7324-5 (ISBN)
Description
If you're like most sales leaders, your incentive program is a constant challenge, as you try to jumpstart sales, energize a geographically dispersed and autonomous workforce, and motivate salespeople to achieve ambitious revenue goals. And sometimes it seems like you just don't know what works; your products and markets are changing, the incentive program that was so successful last year no longer produces the desired results, or perhaps the generous incentive program you created has yielded a corps of highly paid salespeople who spend most of their time on existing clients and minimal time generating new business -- and threaten to walk away with your customer base if you scale back paychecks!
Incentive programs are seductively powerful but complicated instruments. Without careful planning and implementation, they can be too stingy to motivate, too complex to understand, too quick to reward mediocre results, and too difficult to implement. But a well-designed and implemented incentive program is an essential tool for building a motivated, highly effective sales force that delivers the results you need.
The Complete Guide to Sales Force Incentive Compensation is a practical, accessible, detailed roadmap to building a compensation system that gets it right by creating motivating incentives that produce positive outcomes. Packed with hundreds of real-life examples of what works and what doesn't, this important guide helps you:
??Understand the value of building an incentive plan that is aligned with your company's goals and culture.
??Avoid the common trap of overusing incentives to solve too many sales management problems.
??Measure the effectiveness of your current incentive program, employing easy-to-use tools and metrics for pinpointing its weak spots.
?? Design a compensation plan that attracts and retains successful salespeople, including guidelines for determining the correct pay level, the best salary incentive mix, the proper performance measures, and the right performance payout relationship.
??Select an incentive compensation plan that works for your organization -- then test the plan before it is launched.
??Set territory-level goals that are fair and realistic, and avoid overpaying the sales force because goals are too easy, or demoralizing salespeople by having goals that are too difficult or not fairly assigned.
??Create and manage sales contests, SPIFFs (Special Performance Incentive for Field Force), and recognition programs that consistently deliver the intended results.
??Manage a successful transition to a new compensation plan and build efficient administration systems to support your plan.
Every year, corporations spend $200 billion compensating their sales forces, with extremely mixed results. Make sure every dollar you spend is helping to achieve your goal of creating an empowered, effective sales force that drives your company's success. Packed with ready-to-use formulas and assessment tools and a wealth of insights from frontline sales managers and executives, The Complete Guide to Sales Force Incentive Compensation is your hands-on, easy-to-read playbook for crucially important decisions.
Incentive programs are seductively powerful but complicated instruments. Without careful planning and implementation, they can be too stingy to motivate, too complex to understand, too quick to reward mediocre results, and too difficult to implement. But a well-designed and implemented incentive program is an essential tool for building a motivated, highly effective sales force that delivers the results you need.
The Complete Guide to Sales Force Incentive Compensation is a practical, accessible, detailed roadmap to building a compensation system that gets it right by creating motivating incentives that produce positive outcomes. Packed with hundreds of real-life examples of what works and what doesn't, this important guide helps you:
??Understand the value of building an incentive plan that is aligned with your company's goals and culture.
??Avoid the common trap of overusing incentives to solve too many sales management problems.
??Measure the effectiveness of your current incentive program, employing easy-to-use tools and metrics for pinpointing its weak spots.
?? Design a compensation plan that attracts and retains successful salespeople, including guidelines for determining the correct pay level, the best salary incentive mix, the proper performance measures, and the right performance payout relationship.
??Select an incentive compensation plan that works for your organization -- then test the plan before it is launched.
??Set territory-level goals that are fair and realistic, and avoid overpaying the sales force because goals are too easy, or demoralizing salespeople by having goals that are too difficult or not fairly assigned.
??Create and manage sales contests, SPIFFs (Special Performance Incentive for Field Force), and recognition programs that consistently deliver the intended results.
??Manage a successful transition to a new compensation plan and build efficient administration systems to support your plan.
Every year, corporations spend $200 billion compensating their sales forces, with extremely mixed results. Make sure every dollar you spend is helping to achieve your goal of creating an empowered, effective sales force that drives your company's success. Packed with ready-to-use formulas and assessment tools and a wealth of insights from frontline sales managers and executives, The Complete Guide to Sales Force Incentive Compensation is your hands-on, easy-to-read playbook for crucially important decisions.
More details
Persons
Andris Zoltners is a professor of marketing at the Kellogg School of Management at Northwestern University.
Prabhakant Sinha teaches courses on sales force effectiveness at Kellogg and the Management
Centre Europe.
They are founders and co-chairmen of ZS Associates, a global business consulting firm and coauthors of
The Complete Guide to Accelerating Sales Force Performance.
Sally Lorimer is a consultant specializing in sales and marketing and a former principal at ZS Associates
Prabhakant Sinha teaches courses on sales force effectiveness at Kellogg and the Management
Centre Europe.
They are founders and co-chairmen of ZS Associates, a global business consulting firm and coauthors of
The Complete Guide to Accelerating Sales Force Performance.
Sally Lorimer is a consultant specializing in sales and marketing and a former principal at ZS Associates
Content
"Preface viii
Acknowledgments xi
Chapter 1 Sales Force Incentive Compensation and the Successful
Sales Organization
Introduction 2
The Drivers of Sales Force Compensation Change 12
The Sales Force Compensation Challenge 17
The Sales Management System 19
The Role of Incentive Compensation Within the Sales
Management System 23
Diagnosing Sales Force Issues 29
How This Book Is Organized 32
Chapter 2 Reviewing a Current Incentive Compensation Plan and
Setting Objectives for a New Plan
Introduction 40
Is It Really an Incentive Compensation Plan Problem? 41
An Overview of a Sales Incentive Plan Assessment Process 44
Assessment of Current Sales Compensation Plan Consequences 45
Assessment of Current Sales Compensation Plan Consistency and
Compatibility 76
Developing New Plan Objectives 83
PAGE v
v
.................15869$ CNTS 05-19-06 09:21:54 PS
vi Contents
Chapter 3 Plan Design Fundamentals
Introduction 93
Sales Compensation Plan Design Terminology 94
Chapter 4 Plan Design Part 1: Determining the Correct Pay Level
Is Your Sales Force Pay Level Correct? 108
The Range of Sales Force Pay Levels 112
How to Determine the Right Sales Force Pay Level 115
Conclusion 137
Chapter 5 Plan Design Part 2: Finding the Best Salary-Incentive
Mix
Introduction 141
Do You Have the Right Pay Mix? 143
The Range of Salary-Incentive Mix 151
How to Determine the Right Salary-Incentive Mix 160
A Pay Mix Scorecard 179
Chapter 6 Plan Design Part 3: Selecting Performance Measures
Are You Using the Most Appropriate Performance Measures to
Determine Your Incentive Plan Payout? 184
Types of Measures 187
How to Determine the Most Appropriate Sales Incentive
Measures: An Advisory 192
How to Determine the Most Appropriate Sales Incentive
Measures: Specifics 198
Chapter 7 Plan Design Part 4: Determining the Right
Performance-Payout Relationship
Introduction 226
Is the Most Appropriate Performance -- Payout Relationship
Used for Determining the Incentive Plan Payout? 227
Representing Performance -- Payout Relationships 228
Decision 1: Bonus Plan or Commission Plan? 231
Decision 2: Progressive or Regressive Plan? 237
Decision 3: Caps or No Caps? 243
Decision 4: Pay from the First Dollar or from Goal or a Fraction
of Goal? 245
Decision 5: Single Measure or Multiple Measures? 251
Concluding Insights 261
Chapter 8 Evaluating Proposed Sales Incentive Compensation
Plan Alternatives and Selecting a New Plan
Introduction 265
An Overview of Candidate Sales Compensation Plan Assessment 267
PAGE .................15869$ CNTS 05-19-06 09:21:55 PS vi
Contents vii
Quantitative Assessment of a Candidate Sales Compensation Plan 271
Qualitative Assessment of a Candidate Sales Compensation Plan 295
Future-Proofing Assessment of a Candidate Sales Compensation
Plan 306
Conclusion: From Objectives to Reality 308
Chapter 9 Setting Effective Goals and Objectives
Introduction 313
Are Your Sales Force Goals Appropriate? 314
Types of Goals 327
How to Set Effective Sales Force Goals: a Five Step Process 330
Tracking Performance Against Goals 369
Goal-Setting Recommendations 372
Concluding Insights 375
Chapter 10 Increasing Sales Force Motivation Through Sales
Contests, SPIFFs, and Recognition Programs
Introduction 378
Sales Contests and SPIFFS 380
Recognition Programs 403
Insights 407
Chapter 11 Making an Effective Transition with a Major
Incentive Compensation Plan Change
Introduction 410
Sales Incentive Compensation Plan Change and the Sales
Management System 415
Challenging Sales Incentive Compensation Plan Transitions 421
A Sales Force Change Process Framework 435
Chapter 12 Incentive Compensation Plan Administration
Introduction 454
Is the Incentive Compensation Plan Administered Well? 458
IC Plan Administration Systems and Processes 461
How to Design an Effective IC Plan Administration System 476
Summary 489
Index 491
About the Authors"
Acknowledgments xi
Chapter 1 Sales Force Incentive Compensation and the Successful
Sales Organization
Introduction 2
The Drivers of Sales Force Compensation Change 12
The Sales Force Compensation Challenge 17
The Sales Management System 19
The Role of Incentive Compensation Within the Sales
Management System 23
Diagnosing Sales Force Issues 29
How This Book Is Organized 32
Chapter 2 Reviewing a Current Incentive Compensation Plan and
Setting Objectives for a New Plan
Introduction 40
Is It Really an Incentive Compensation Plan Problem? 41
An Overview of a Sales Incentive Plan Assessment Process 44
Assessment of Current Sales Compensation Plan Consequences 45
Assessment of Current Sales Compensation Plan Consistency and
Compatibility 76
Developing New Plan Objectives 83
PAGE v
v
.................15869$ CNTS 05-19-06 09:21:54 PS
vi Contents
Chapter 3 Plan Design Fundamentals
Introduction 93
Sales Compensation Plan Design Terminology 94
Chapter 4 Plan Design Part 1: Determining the Correct Pay Level
Is Your Sales Force Pay Level Correct? 108
The Range of Sales Force Pay Levels 112
How to Determine the Right Sales Force Pay Level 115
Conclusion 137
Chapter 5 Plan Design Part 2: Finding the Best Salary-Incentive
Mix
Introduction 141
Do You Have the Right Pay Mix? 143
The Range of Salary-Incentive Mix 151
How to Determine the Right Salary-Incentive Mix 160
A Pay Mix Scorecard 179
Chapter 6 Plan Design Part 3: Selecting Performance Measures
Are You Using the Most Appropriate Performance Measures to
Determine Your Incentive Plan Payout? 184
Types of Measures 187
How to Determine the Most Appropriate Sales Incentive
Measures: An Advisory 192
How to Determine the Most Appropriate Sales Incentive
Measures: Specifics 198
Chapter 7 Plan Design Part 4: Determining the Right
Performance-Payout Relationship
Introduction 226
Is the Most Appropriate Performance -- Payout Relationship
Used for Determining the Incentive Plan Payout? 227
Representing Performance -- Payout Relationships 228
Decision 1: Bonus Plan or Commission Plan? 231
Decision 2: Progressive or Regressive Plan? 237
Decision 3: Caps or No Caps? 243
Decision 4: Pay from the First Dollar or from Goal or a Fraction
of Goal? 245
Decision 5: Single Measure or Multiple Measures? 251
Concluding Insights 261
Chapter 8 Evaluating Proposed Sales Incentive Compensation
Plan Alternatives and Selecting a New Plan
Introduction 265
An Overview of Candidate Sales Compensation Plan Assessment 267
PAGE .................15869$ CNTS 05-19-06 09:21:55 PS vi
Contents vii
Quantitative Assessment of a Candidate Sales Compensation Plan 271
Qualitative Assessment of a Candidate Sales Compensation Plan 295
Future-Proofing Assessment of a Candidate Sales Compensation
Plan 306
Conclusion: From Objectives to Reality 308
Chapter 9 Setting Effective Goals and Objectives
Introduction 313
Are Your Sales Force Goals Appropriate? 314
Types of Goals 327
How to Set Effective Sales Force Goals: a Five Step Process 330
Tracking Performance Against Goals 369
Goal-Setting Recommendations 372
Concluding Insights 375
Chapter 10 Increasing Sales Force Motivation Through Sales
Contests, SPIFFs, and Recognition Programs
Introduction 378
Sales Contests and SPIFFS 380
Recognition Programs 403
Insights 407
Chapter 11 Making an Effective Transition with a Major
Incentive Compensation Plan Change
Introduction 410
Sales Incentive Compensation Plan Change and the Sales
Management System 415
Challenging Sales Incentive Compensation Plan Transitions 421
A Sales Force Change Process Framework 435
Chapter 12 Incentive Compensation Plan Administration
Introduction 454
Is the Incentive Compensation Plan Administered Well? 458
IC Plan Administration Systems and Processes 461
How to Design an Effective IC Plan Administration System 476
Summary 489
Index 491
About the Authors"