Sales Incentive Plans Overview

No commercial organization can survive without the sales. The sales brings the blood of the organization. The organization needs the sales to grow and to successfully compete with other organizations on the market.

The sales incentives compensation plans are the compensation tools to support and motivate the sales function to compete and to increase the sales volumes of the organization.

The art of Sales Incentives Compensation Plans

The sales incentives compensation plan can really motivate the salesman to sell more products and services. Or, they can easily destroy the company, when the design of the sales incentive plan is not good and it does not support the business goals.

The sales incentive plans should be always focused on increasing the profitability of the company or gaining the additional market share. That is the theory behind the sales incentives plans. As the incentive plans are usually introduced purely by the business function, they fail and they do not support the goals of the organization, they just allow the employees to earn more.

The art of developing the sales incentives plans takes several years of learning and measuring the results achieved. The senior manager of the Sales function usually knows, what has to be achieved, but does not know, how to achieve that by using the incentive plans, which are cost-efficient and not hurting the future of the organization.

The sales incentive plan has to be fair to the whole organization. The employees in the Back Office and the support functions should not feel the internal unfairness. They understand, that the sales representatives have to be motivated by the additional compensation component, but it should be aligned with the overall compensation scheme and the compensation strategy applied in the whole organization.

Sales Incentives Development

The development of the sales incentive scheme has to be a joint initiative of Human Resources and the business function. HR has to define the general principles, which have to be applied in each incentive scheme as it follows the compensation strategy and does not break the internal equity in the organization.

The effective sales incentive plan does not evolve on its own. The development process is creative and full of the conflicts between HR and the business. The good incentive plan is always tested on several employees to see the real results from the field as the joint team can do the adjustments into the incentive scheme and can make it more realistic.

The sales incentive scheme can be developed in the co-operation with the external compensation consultant and it is recommended for the first incentive scheme in the organization, but the compensation consultants should not be invited later in the process as they can set a generic incentive scheme, which does not fully support the goals of the organization. The organization should develop its internal know-how for the development of the incentive schemes.