The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work

The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work

by Andris A. Zoltners, Prabhakant Sinha
     
 

Designing an incentive plan to turn sales reps into sales superstars!

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

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Overview

Designing an incentive plan to turn sales reps into sales superstars!

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.

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Product Details

ISBN-13:
9780814473245
Publisher:
AMACOM Books
Publication date:
08/07/2006
Edition description:
New Edition
Pages:
496
Sales rank:
409,251
Product dimensions:
7.10(w) x 10.10(h) x 1.80(d)
Age Range:
17 Years

Meet the Author

Andris A. Zoltners is a Professor of Marketing at the Kellogg School of Management at Northwestern University. He is a founder and co-chairman of ZS Associates, a global business consulting firm. For over 30 years, he has served the business community as a professor, consultant, speaker, and author on marketing and sales force performance.

Prabhakant Sinha is a founder and co-chairman of ZS Associates, where he has consulted with more than 200 firms in North America, Europe, and Asia. He also teaches executive education courses on sales force effectiveness at Kellogg, the London Business School, and the Indian School of Business, and leads custom workshops for sales leadership teams.

Sally E. Lorimer is a consultant, specializing in sales and marketing, and business writer. She was previously a principal at ZS Associates, where she consulted with numerous companies on sales force design.

All three are coauthors of Sales Force Design for Strategic Advantage, and Zoltners and Sinha are coauthors (with Greggor A. Zoltners) of The Complete Guide to Accelerating Sales Force Performance.

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Table of Contents

"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

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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

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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"

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