Determining sales compensation best practices at a small or medium-sized business can be a complicated task. Unlike large companies that have the resources to invest aggressively in multiple approaches and the deep pockets to avoid being sunk by failed strategies, SMBs operate on thin margins. Whether they are just starting out or kept small by design, these organizations need to ensure that they’re creating a mixture of salaries, bonuses and commissions that can encourage consistent employee productivity and improve the bottom line.
3 sales compensation best practices:
- Keep it positive: The quickest way to torpedo a sales compensation plan is to make employees feel like they’re underappreciated by creating quotas and goals that strain credulity. One of the reasons many people choose to work at an SMB is the belief that they have more of a personal stake in the organization’s success. By creating reasonable goals and defined metrics for incentive compensation above the salary floor, an SMB can reward employees in a reasonable and productive way.
- Have a plan (really, have a plan): The frequency with which SMBs have little planning or strategies in place for sales compensation management can be a little jaw-dropping. Without highly effective financial planning, SMBs aren’t likely to survive long, observed Marshfield News Herald contributor Marisa Cuellar. SMBs should also plan their budgets on the basis that employees will take advantage of sales compensation – send the message that your company is ready to take off.
- Develop better metrics: Many sports have seen player evaluation techniques transform over the past several years with the introduction of advanced statistical analysis. Traditional simple measurements, such as a baseball player’s batting average or a basketball player’s shooting percentage, give some idea of performance, and the player can be rewarded accordingly. However, they don’t tell the whole story. More complex metrics can often be more revealing than the same old ones. The same can be true for sales compensation management, according to Modern Distribution Management. Instead of compensation directly linked to sales or gross profit, a cost-to-serve metric could offer more insight into the actual profitability of a sale.
Every company is different, and each set of sales compensation best practices will naturally be tailored to an organization’s individual needs. It’s important to take the time to address compensation in a meaningful way. Organizations should look to develop approaches that invigorate employees and prove profitable in both the short and long term.
