SALES COMPENSATION
Too many measures spoil sales incentive plans
Sales is one of the most important functions in any company so employers are continually trying to find the most effective way to reward and motivate their sales teams. One consequence of this seems to be an over-engineering of sales incentives plans with organisations continually tweaking schemes and often adding more and more performance measures in order to achieve the right balance, according to recent research from Watson Wyatt.
The result is that many companies have too many measures leading to a dilution of the effectiveness of sales incentive plans. In contrast, Watson Wyatt argues that any sales professional should not be faced with more than three targets.
%ADVERT%
Watson Wyatt's survey, The 2007 Global Sales Incentive Plan Study, examined sales plans in over 200 companies in 22 countries and found revenue volume to be the primary measure for most industries and roles. It also found an increasing use of team measures due to account management and cross-selling initiatives.
Marked variations by sector
There were considerable differences by sector, however, with banking having multiple measures in frequent use and the hi-tech sector far fewer.
There were seven dominant measures in the banking sector at branch manager level, for example, including:
revenue volume
number of new accounts
number of units sold
sales growth
profit margin
expense control
customer satisfaction.
In contrast, for a similar level position in hi-tech companies, only three were used by a significant number of companies:
revenue volume
management by objectives
profit margin.
A final word
"We believe hi-tech companies are ahead of the curve by moving away from using lots of measures. “We are likely to see other sectors following suit in having fewer measures. Companies are finding that having too many measures dilutes their effectiveness and the laudable intentions behind them risk getting lost. Two is ideal for any sales role, and three is the maximum." - Chantal Free, European head of sales effectiveness and compensation consulting, Watson Wyatt.
Want to know more?
Title: The 2007 Global Sales Incentive Plan Study, Watson Wyatt.
Availability: For more information about the survey contact Marina Neophytou. email: marina.neophytou@watsonwyatt.com or tel: 020 7227 2325. Alternatively, for more information on this area contact Chantal Free, tel: 020 7227 2268, email: chantal.free@watsonwyatt.com.
Watson Wyatt is the “trusted business partner to the world's leading organisations on people and financial issues”. The firm's global services include: managing the cost and effectiveness of employee benefit programmes; developing attraction, retention and reward strategies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,000 associates in 31 countries. It’s located on the web at www.watsonwyatt.com.