Historically, the sales team at Company X has been compensated via a fixed salary plan. Fixed salary plans for salespeople have the advantage of encouraging sales people to stay with the company, but reward high and low performers at the same rate. Therefore, high-performing salespeople tend to move on to companies that reward them directly for their success (Dessler, 2008). Recently, Company X’s sales manager noticed that her team seemed unmotivated. She feels the sales goals she has set are reasonable, but most of the team is failing to reach them. It is time for Company X to reevaluate the compensation and incentive plan for its sales team.
The first thing to do is ensure that the current sales quota is as reasonable as the sales manager believes. Sales guru Kelley Robertson (n.d.) recommends involving the sales team in the quota determination process. The sales manager needs to sit down with her team and communicate to them the company’s overall goals and specifically how sales fit into that picture. Once the team understands the company’s objective, she can work with them to define goals that conform to the SMART guidelines: Specific, Motivating, Achievable, Relevant, and Timely. Having the team involved in the quota setting process not only empowers them as employees, but encourages them to buy into the new quotas that they helped define (Robertson, n.d.). Finally, it’s important to remember that a quota is set at the right level if 60-70% of the sales team is able to achieve it (Dessler, 2008).
With the new sales quotas in place, the sales team now has an intrinsic motivator for success. The sales manager can now focus on adjusting the compensation and incentive plan to provide the sales team with a financial motivator. Although a straight commission plan would directly reward each employee for the sales he makes, it has the unfortunate side effect of encouraging sales people to focus only on closing sales. Company X believes that foster relationship with customers is an important part of the overall company strategy. Therefore, the sales team should instead use a combination plan that pays a lower base salary, and then commission for each sales over a specified minimum. It is extremely important to work Company X’s managerial accountants when deriving the commission amount. Commissions should be high enough to provide the appropriate motivation, but the managerial accounting team can help HR and the sales manager better understand Company X’s costs. It is best to set the commissions right the first time with a little research, than to lower them at a later time because they are cutting too deeply into profits (Dessler, 2008).
The final piece of the motivational puzzle for the Company X sales team is for the sales manager to evaluate her own management style. By involving her team in the quota setting process, she has already a long way toward her goal. Now, she must make sure to recognize each employees contribution to the company’s success. Studies have shown that financial incentives coupled with employee recognition produce 30% greater results. Employee recognition can come in many forms and does not have to be public. Care must be taken to not overdo recognition, but two-thirds of respondents to a recent survey said that appreciation for their work was an important part of their motivation (Dessler, 2008).
Dessler, G. (2008). Human Resource Management. (11th ed.). Upper Saddle River, NJ: Pearson.
Robertson, K. (n.d.). Secrets to motivating your sales team. Retrieved January 23, 2009.