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Upper Saddle River, NJ - August 17, 2010 - We are well into the second year of a worldwide and major economic correction. Although the economy seems to be improving, intermittent bad news has the effect of stirring up uncertainty which, in turn, stifles an upturn. Without a sustained and noticeable upswing in sales, companies (and the economy) will continue to merely stagger along. We concur with current thinking that companies need to take a hard look at their marketing approach and sales strategy to identify areas for improvement. High on the list of considerations is sales compensation. In the current economic climate, companies need to ask themselves specific questions: •How does the current economy impact our company’s sales compensation program? •Can our current sales force maximize sales effectiveness in the current economy? What tools will they need to increase sales, both now and in the future? •Can we anticipate what will happen when the rebound hits? How do we prepare ourselves for the upturn? These are difficult questions that require significant thought and attention, and therefore, suggest that there is no "quick fix." To make the necessary changes that will enable a company to be effective in its sales efforts, modifications to sales compensation processes require a clear plan focus, sustained motivation, and an awards structure that promotes an increase in the "right" sales. Well-structured pay plans should drive the desired sales activity and result in a dual-win situation for the sales personnel and the company. Conversely, a poorly structured sales compensation program can contribute to a myriad of problems, including misdirected sales efforts, lack of desired focus, gamesmanship, higher turnover, and failure to succeed. There is a collection of simple and straightforward steps companies can take to ensure that their pay programs are actually accomplishing what they want: 1.Clearly identify what the company wants to achieve. oHave our company’s objectives been prioritized (e.g., new business versus organic growth, new customers versus existing customers)? oHave sales expectations been identified (e.g., increase incremental sales or maintain current unit sales)? oHave we valued what is most important (e.g., differentiate sales awards based on most desired or highest margin)? 2.Determine where the business is coming from. oWhat marketing efforts are most productive? Has the company actually mined its data to determine where its business comes from? oDo sales follow the 80/20 rule (80% of business comes from 20% of customers and/or 80% of the business is brought in by 20% of the sales personnel)? Does the compensation plan reflect and reward that reality? oAre the right personnel being credited for each sale? If not, why not? 3.Determine the real cost of sales. oWhat is the calculated cost of each sale? Do we understand our true margin? oWhat is the total cost of each salesperson, including salary or draw, benefits, time/expenses, general & administrative, and related expenses? Does the value of the sales justify the costs? Then, 4.Review the plan to determine if it focuses attention on the desired objectives and behaviors. oHas the company indicated what it wants? Does the company clearly and consistently communicate its expectations in words and deeds? oHave sales increased since the current plan was implemented? Have those been profitable sales? In other words, is our company making satisfactory margins/profits from our sales? oAre the right kinds of sales being made? Do sales efforts add new customers, or more sales to existing customers? oIs the plan simple to understand and administer? Can our company accurately track sales and pay commissions on a timely basis? oUltimately, does the current sales compensation plan provide the financial motivation and focus to achieve our business needs? And is it right for the economic times? As you consider each of the above factors, along with others that may be specific to your business, you should be better able to assess the effectiveness of your sales compensation program. If the results show that your sales compensation plan is not meeting your company's objectives, now is a good time to reevaluate and amend. An economic correction is coming; is your company ready for your customer’s positive reactions?
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