Our Approach:
In many of the industries that The Croner Company serves, we have found that as much as 15% of total revenues are expended for the compensation of sales personnel. For over three decades, we have assisted a wide variety of clients with the development of their sales incentive plans and programs. In many industries that we serve, its sales incentive plan is the critical element that enables the company to compete for sales talent. Often, we design sales incentive plans as part of our work on developing comprehensive compensation plans. At other times, we will work only on the design of only sales incentive plans.
We believe the best sales incentive plans are those that clearly link individual pay and awards to company or unit revenue and margin results or to other, important measurable outcomes. The best sales incentive plans clearly tie individual pay and awards to individual or team sales goals.
The most successful sales incentive plans reward only the achievement of exceptional results and outcomes; are easy to understand and to administer; and, clearly reinforce the achievement of the company's business model and results. It is important that sales incentive plans do not become "entitlements" to participants and that the goals that are set are neither too easy nor too stringent. Typically, sales incentive plans are based upon the market rates for such plans.
Key Project Steps in the Design of a Sales Incentive Plan:
Primary Objectives.
Working closely with management, we define the primary objectives for the incentive plan (i.e., what revenue levels or specific outcomes the sales plan is intended to reward, e.g., development of new channel; penetration of new or existing clients, etc.) In this initial step, we also identify the employees who will participate in the sales incentive plan and the basis for selecting incentive plan participants.
Award Levels.
Next we work with management to determine "target award levels" and the range of awards, including, as appropriate, incentive "caps" or limits. In this step, we also define the mix of compensation between base and variable components. We address the following questions: What will be the "leverage" or relationship of sales incentives to base pay? How will sales incentive awards be determined? How frequently will sales incentive awards be paid? What is the "efficiency" of the sales incentive plan (i.e., how much is being expended in sales compensation for each dollar of revenue?)
Annual "Update".
In most cases, we conduct an annual "update" of the sales incentive plan to bring the plan, in all respects, into a competitive market position, to track changes in product or service offerings and to make other needed modifications.
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