Do the Compensation 10-Step

Today there’s a great deal more to compensating salespeople than merely establishing a base salary and adding commissions. Management consultant Brad Brown with Reward Strategies suggests the following 10 steps to taking your incentive/compensation plan into the 21st century:

Get involved
Salespeople respond to managers who develop strong relationships with their reports. This will also give you insight into what they will respond to, which should be helpful when you revamp the compensation mix.

A solicit affair
Let your salespeople know you want their input about compensation and incentive issues. They’ll care because it’s their earnings at stake. And with their input up front, they’ll be more likely to support the end result.

Where’s the beef?
What are your organizational goals? What behaviors by your salespeople will deliver those results? These are the behaviors to reward with incentives and bonuses.

Role call
Write explicit job descriptions for each of your reports. This will draw out the different roles each person plays in the organizational success.

On your benchmark, get set, go
Look at published surveys and, if possible, information from your competitors to determine a standard base salary, targeted incentive compensation, total compensation and base salary/incentive mix.

Mix and match
When salespeople are required to take a great deal of initiative and rely on their own resourcefulness to succeed, a greater proportion of their compensation mix should come from incentives.

Design on the dotted line
In putting together the incentive component, bear the following in mind:keep it simple. If you can’t explain it to your salespeople quickly and easily, it’s too complicated.Figure out the two or three behaviors you most want to encourage, and then tie your bonuses or incentives to those behaviors.Make sure you’re not encouraging any unintended behaviors or shortcuts.Assign a threshold where incentive payouts will begin, and if necessary, a limit as well.

Get your feedback
Rather than providing actual numbers, which will get them thinking about their own compensation exclusively, talk to your salespeople about the framework you’ve developed. Then get their input.

Fine tune up
Based on staff recommendations, adjust your plan wherever it makes sense to do so. Then plug in past numbers to make sure you’re balancing competitive compensation with profitability.

Adjust rewards
Track the plan’s success over time and then make adjustments based on whether you’re motivating the right actions and driving toward the goals you originally established.