The complete guide to sales force incentive compensation pdf

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    The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work [Andris Zoltners, Prabhakant Sinha, Sally Lorimer]. The Complete Guide to Sales Force Incentive Compensation How to Design Like its competitors 17Sales Force Incentive Compensation and the .. DOWNLOAD FULL PDF EBOOK here { }. š¯—£š¯——š¯—™ | The objective of this paper is to propose a simple procedure for setting also led to comprehensive review articles (Albers ; Coughlan and Sen ). part of the main sales force compensation plan, or as a separate short-run . by territory industry sales) variations over some reference period provide clear.

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    The Complete Guide To Sales Force Incentive Compensation Pdf

    Read The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work book reviews & author details and more at. 26 sales force compensation: research insights and research amount is above which bonus is earned; linking incentive pay to salespeople's ability to Lorimer (), The Complete Guide to Sales Force. Incentive. At its heart, compensation is a very human ā€“ and personal ā€“ issue. The Complete Guide to Sales Force Incentive Compensation by Andris A.

    Innovative Recommendation Planning the ideal salesforce incentive compensation program is very challenging. 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.

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    Show More. No Downloads. Views Total views. Actions Shares. Embeds 0 No embeds. No notes for slide. Zoltners, Prabhakant Sinha, and Sally E. Special discounts on bulk quantities of AMACOM books are available to corporations, professional associations, and other organizations.

    It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. The complete guide to sales force incentive compensation: Includes index. Sales personnelā€”Salaries, etc. Sinha, Prabhakant. Lorimer, Sally E. Z65 All rights reserved. Printed in the United States of America.

    This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, Broadway, New York, NY To Linda, Sally, and Prabha, who make writing books easy and enjoyable.

    This page intentionally left blank 5. Bonus Plan or Commission Plan? Progressive or Regressive Plan? Caps or No Caps? Single Measure or Multiple Measures? Preface The use of incentives for effective sales force management is a two-edged sword. On the one side, the right incentive plan can inspire and energize a sales force to work hard to achieve challenging goals. They also set expectations for salespeople of what is important to the company.

    Incentives help to hold sales- people, who often work alone and unsupervised, accountable for results. Paying for performance helps a company hire and retain salespeople who are highly motivated to do what it takes to drive company results. On the other side, incentives also create many sales force management chal- lenges.

    Incentives can ac- tually reduce motivation and lead to turnover among salespeople who feel that they are not getting as much incentive money as they deserve or who feel that others who are performing worse are making more money. Other company employees may feel that sales force incentives are excessive, thereby hindering teamwork among departments and compromising customer relationships.

    Time Off and Leaves

    Finally, sales incentive viii 9. On the other hand, the wrong plan or a good plan that is implemented poorly has the potential to do considerable harm. Salespeople may feel discour- aged and let down.

    The best sales candidates may not join the company, good salespeople may leave, the sales force may not be motivated to work hard or spend time effectively, relationships with customers may suffer, and sales performance may fail to reach company expectations. With an ineffective incentive plan, the considerable money spent on incentives generates very low incremental sales. How to Design and Implement Plans That Work is to create a comprehensive and highly practical book that is unique within the compensation literature.

    The book is brilliantly architected along three important dimensions for the reader. Each chapter is illustrated with problems faced by managers in a wide range of industries. Finally, in the last several chapters, the authors provide many practical tips and a wealth of advice on implementation issues. We use hundreds of We present concepts in considerable detail so that new ideas can be immediately applied by compensation plan designers.

    We describe numerous innovative approaches and metrics for measuring how effective the current sales compensation program has been and how effective alternative new incentive plans are likely to be if they are implemented. Acknowledgments As academic researchers and consultants, we have worked personally with execu- tives, sales managers, and salespeople at hundreds of companies all over the world.

    We owe our grati- tude to thousands of executives and midlevel managers who have participated in the Executive Education and MBA programs at Kellogg. Our classroom interac- tions with these individuals have been invaluable for transforming our theories and frameworks into practical sales force management tools.

    We are grateful to all our colleagues at Northwestern and elsewhere who have supported us, both academically and as friends. Special contributions came from the following people: Thank you to our Incentive Compensation Advisory Board. The board members brought experience, creativity, judgment, and interesting examples of good and inappropriate incentive compensation practices. Wayne Newspaper, Inc. We owe very special thanks to several research and editorial assistants whose work has improved the quality of the book substantially.

    Mary Henske ZS Associ- ates carefully reviewed every chapter for clarity and content, suggesting revisions based on her extensive sales force knowledge and expertise. Ramya Balasubramanian applied her outstanding research skills to discover many of the examples used throughout the book.

    Greg Zoltners researched and developed content as a coauthor of one of our earlier books, providing a strong foundation upon which to build the ideas for this book.

    An Upstream View 23 Compatibility: Almost all companies use some form of vari- able compensation for their sales force, including cash bonuses, commissions, trips, or other awards that are tied to the achievement of performance outcomes. The average salesperson in the United States earns approximately 40 percent of his total cash compensation through performance-based incentives.

    At one end of the spectrum, approximately 15 percent of salespeople do not earn any salary at allā€” percent of their income comes from variable pay that is tied to perform- ance. A small percentage of U.

    The impact of a sales force incentive program goes well beyond cost. The sales force compensation plan is an important driver of sales success. A well-designed plan that is implemented effectively helps a company attract and retain the best salespeople. It energizes salespeople, who often work alone, face frequent cus- tomer rejection, and consequently seek positive reinforcement for success.

    It mo- An effective incentive plan can be a considerable source of sales force enthusiasm and inspiration. On the other hand, an ineffective plan can cause salespeople to feel discouraged and dis- engaged. If the incentive plan is not right, the best salespeople may not come to work for the company, and above-average salespeople may leave for better opportunities.

    Salespeople may not be motivated to work hard or may focus on the wrong customers, products, or selling activities. Relationships with customers may suffer. Salespeople were paid a straight salary, and good salespeople would demand raises when- ever they grew their business. Revenue growth was severely hampered by the high sales force turnover. A new commission-based plan was imple- mented.

    Sales jumped percent after the new pay plan was instituted. Field sales- people complained excessively to management about how confusing and unpredictable the plan was. The plan had been adjusted so many times that At the same time, as the FedEx product line was becoming more diverse, top management felt that the current plan was not encouraging salespeople to spend their time on the right mix of products.

    FedEx developed a new compensation plan to address these concerns. Salespeople were given quotas for each of the three major FedEx product lines, and certain bonuses and commissions could be earned only if the quota were achieved for all three. This made it clear to the sales force that all product lines were important, since the highest payout levels could be attained only by salespeople who did well in selling all three product lines.

    The new plan was supported with a comprehensive communication program that educated salespeople about the new plan and provided constant feed- back on performance.

    If salespeople have unrealistic goals for even one of the product lines, the incentive plan can become demoti- vating. Does the company believe, for example, that for every salesperson, achieving percent of goal on two product lines and 95 percent on one is worse than being at percent on all three product lines?

    In addition, incentive plans need to adapt to new situations over time. Sales incentive compensation has high salience for sales leaders, since sales incen- tives have a high cost, high impact, considerable opportunity for misdirection, and the need to evolve.

    Examples of Some Common Sales Incentive Plan Design Successes and Failures Successful incentive compensation plan design requires a complex mixture of experience-based wisdom and analytics. Without both of these, serious mistakes are easy to make and are in fact very common. Experience enables a management team to foresee the consequences of plan features and to design a plan with lon- gevity. Analytics provide insights regarding the likely impact of future events on sales force motivation and plan costs.

    Here are some examples of incentive plan design successes and mistakes that have resulted from the presence or lack of experience and analytical rigor in the incentive plan design process. A bank wants to encourage its tellers to upsell customers when they come into a branch location to deposit money. In addition to incentives, successful implementation of cross-selling initiatives usually involves adjustments to other sales force effectiveness drivers.

    For example, management at Iowa-based Brenton Banks wanted to encourage successful cross- selling of banking and brokerage products and services. The banking division, which sold deposits, loans, and trust services, operated totally independently from the brokerage division, which sold investment products.

    A strong referral culture between the two divisions did not exist, and bankers and brokers preferred to keep their customers to themselves. To start, management redrew the organization chart, creating a single Brenton sales force. Bankers and brokers were given a single net income goal that was not broken down according to the old banking and brokerage divisions.

    Joint sales calls crossing the traditional banking and brokerage boundaries were encouraged. A training company was hired to provide training across the sales force on the full range of product offerings. In addition, the incentive plan was revamped so that bankers could receive commissions for broker product sales and brokers could receive commissions for bank product sales.

    The new approach, incorporating multiple sales force effectiveness driver changes, encouraged the entire sales force to be much more sales-oriented and proactive about developing leads and cross-selling. A company that currently sells one major product is launching a new product. The sales force uses a quarterly bonus plan that begins payouts at 95 percent of territory goal achievement.

    Historically, the vast majority of salespeople have achieved at least 95 percent of their goal each quarter. When the company adds the new product to the incentive plan, it uses the same payout schedule for the new product as for the existing product. Not a single salesperson is expected to hit the 95 percent thresh- old. The sales force is so demotivated that it spends much less time than planned on the new product, making the problem of low sales even worse.

    It is usually a mistake to treat a new product like an existing product in an incentive plan. For example, in the following year, the same company launches another new product, and this time a more appropriate incentive plan is adopted. The company realizes that the national forecast for the new product is likely to be wrong either way too low or way too high , and the design of the new incentive plan takes this uncertainty into account.

    This rewards the sales force for early success, ensures that every salesperson is engaged, and protects the sales force and the company in the likely event of a national goal-setting error. In A small product that accounts for just 10 percent of target incentive pay is also sold. The small product is being largely ignored by the sales force, and so its product manager launches a sales contest for a three-month period to stimulate sales. Any salesperson who grows sales to percent or more of goal during the contest period will receive a inch plasma television set.

    The contest is a huge success for the small product, with over half of the sales force exceeding percent goal attainment. Neither core product achieves goal. Sales leaders do not want the sales force to abandon this strategically important new server line, and so they establish a supplemental incentive program to encourage the sales force to continue to support it.

    (PDF Download) The Complete Guide to Sales Force Incentive Compensation: How to Design and

    A manu- facturing company has maintained the same sales compensation plan for over 30 years. The plan targets 80 percent incentives and 20 percent salary. Management has been reluctant to change the plan, for fear of angering the sales- people who control the majority of the business. In addition, many veteran salespeople seem com- placent, content to live off their earnings from existing customers and unwilling to work hard to grow sales in an increasingly competitive market.

    Management wonders if perhaps the time has come to revamp the sales incentive plan. Yet it That way, territory goals can be adjusted appropriately as circumstances change.

    In addition, by changing the plan after just one year, a precedent for change is estab- lished, and future changes are likely to be accepted more readily by the sales force.

    A medical equipment manu- facturer has a complex sales incentive plan. A one-size-fits-all approach simply doesn't work when you need to impact a variety of roles across your department.

    Therefore, it's important that compensation be tailored for different sales roles. The Need for Sales Compensation Top-performing sales organizations rely on compensation as the driver of their sales performance. There is a large opportunity here to leverage sales incentive compensation to improve employee behaviors and performance.

    With the right kind of sales compensation plans, companies can reward desired behaviors to create better and more consistent performanceā€”not just on a one time basis, but monthly, quarterly, and yearly.

    Sales Performance Management | IBM

    Targeted, benchmarked incentives can set your company up to succeed from the start, and enable tactical adjustments throughout the year to adjust to changing market conditions. Sales compensation is improved dramatically by the inclusion of compensation planning tools that are designed to give you empirical insights and improve your plans without relying on hunches or gut feelings. Manager, Content Marketing, at Xactly Corporation , a leading provider of enterprise-class, cloud-based, incentive compensation for employee and sales performance management.

    By Devon McGinnis. Introducing Quip for Salesforce: Try Salesforce.

    Get your FREE day trial. Please complete all fields. Sales Cloud: Jan 18, By Jennifer Dignum. Want more awesome content? Sign up for our newsletter. Back to All Stories. Zoltners, Prabhakant Sinha and Sally Lorimer Considered the ultimate textbook on sales incentives, this book from ZS Associates shows organizations how to motivate sales teams through compensation, covering everything from design to implementation in a practical step-by-step style.

    Incentive Management by James A. Managing Through Incentives by Richard B. McKenzie and Dwight R.