by Phil Phillips, PhD
Contributing Editor
phillips@chemarkconsulting.net
Over the past 40 years we’ve had the opportunity to ob- serve and participate in recommending various types of motivational sales strategies and their associated com-
pensation tactics within the global paints, coatings, adhesives &
sealants industries. Based on these observations the percentage
of relative successes look like this:
When talking with salesmen within these industries we found
the following complaints/issues prevailed:
Quotas set unrealistically high
•Their sales territory was not rich enough in value
opportunity
• The choice territory accounts were considered “house ac-
counts” and, therefore off limits for the salesman
• The salary/commission ratio was out of balance
• The incentive plan was ill-conceived in first place
• Company like to play around with the plan which made
objectives change too frequently
Many companies, on the other hand, look for more effec-
tive means to wringing out higher profits per account by ex-
pending as little in sales compensation as possible in the process
and blanketing the sales persons with the same plan in a “one-
size-fits-all” approach. For instance, placing caps on incentives
across-the-board.It has been proven that the “capping” of incen-
tives decrease high-performing sales persons’ motivation and,
therefore, their overall effort. Similarly, the practice of “ratch-
eting” quotas (raising the annual quota if performance in the
previous year was exceeded) may hurt long-term results.
Historical traditional sales compensation systems, in general
terms, have been using two extremes . . . and then modifications
of both: Salary only and commission only: The faults with these
two systems are these:
• Salary only approach demands extremely close management
supervision and control to assure the company is getting full
effort and efficiencies from their salaried sales persons.
• Commission only approach provides sales persons driven by
short term rewards what they want if they accomplish their ter-
ritorial objectives and, provides principle company management
a constant short term measurement devise... therefore... control.
Selection of a sales incentive plan is influenced by several ele-
ments of importance . . . one very clearly is sales cycle. If a com-
pany’s sales cycles are highly uncertain the more a sales person’s
pay should be based on a fixed salary. Conversely, the less un-
certain the sales cycle, the more pay should depend on commis-
sion. Additionally, experience has taught us the following about
incentifying sales persons: A formula of straight-line commissions
(salespersons earn the same commission rate no matter how
much they sell) is the optimal way to pay sales representatives.
Experience says complications arise when adding in...
• Lots of bonuses
• Variations in commission structure
• Time period goal achievement
Some companies in our industry customize incentives to
match personalities. Customizing the incentive system to each
sales individual’s personality and perceived abilities is NOT the
way to go. Incentive experimentation is ok if it’s done in a con-
fined activity space with several affected management groups as
buy-in observers. This experiment should be basically “offline”
to avoid any hint of upsetting the sales force.
Advice in a nutshell:
1. Remove caps on commissions... the sky’s the limit
2. Make certain sales managers are careful in setting and readjusting quotas
3. Make sure sales managers are NOT over complicating the
system but, measuring their personnel in terms of... keep-
ing them all motivated and engaged
• High Performers
• Average Performers
• Low Performers CW
Best Methods To Compensate Salespersons
