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Keeping Your Sales Team Motivated and Rewarded with Modest Increases in Sales Volume and Profitability

By Michael Maciekowich, Astron Solutions

Since the financial collapse of October 2008 and the sluggish economic recovery that has followed, many organizations have struggled with the issue of sales compensation.  For a short period of time during 2009 and 2010, a number of organizations suspended their sales incentive / commission plans, instead focusing on fundamental customer retention strategies.  The focus was on setting customer retention and satisfaction targets tied to the sales team’s base pay adjustments.  In one creative case, an organization developed a matrix that linked customer retention and customer satisfaction to the percent of the base pay adjustment.  For example:

Customer Satisfaction Level (Based on Survey Results)

% of Customers Retained

75% Satisfaction Rate

85% Satisfaction Rate

95% Satisfaction Rate

100%

5% Base Pay Adjustment

7% Base Pay Adjustment

9% Base Pay Adjustment

95%

4% Base Pay Adjustment

6% Base Pay Adjustment

8% Base Pay Adjustment

90%

3% Base Pay Adjustment

5% Base Pay Adjustment

7% Base Pay Adjustment

During the 2009 -2010 period this program was used to meet a very important need of the company – retain happy customers.  Discretionary bonuses were granted if any salesperson was able to “up sell” to current customers.  There was very low expectation for any new sales.  If a new sale occurred, the sales person was rewarded through a discretionary bonus.

As this organization began planning for 2011, opportunities to “up sell” current clients on enhanced products / services, as well as refocus on new and expanding sales, were prevalent.  The decision was made to maintain the base pay matrix as established, as it was effective in keeping the sales person focused on current customer retention and satisfaction.  In addition, a new sales incentive matrix was established to focus on a combination of new sales to new customers and enhanced sales to current customers.  Since the economy was still recovering it was decided to calculate the sales incentive as a percent of base pay, instead of the traditional percent of sales or profits.

For example:

New Customer Sales Levels as % of Budget

Current Customer “Up Sell” Levels as % of Budget

50%

75%

100%

110% +

15% of Base Pay

20% of Base Pay

30% of Base Pay

100%

10% of Base Pay

15% of Base Pay

20% of Base Pay

90%

5% of Base Pay

10% of Base Pay

15% of Base Pay

In essence, the sales professional had the potential to not only earn a 9% base pay adjustment based on the Retention / Satisfaction matrix shared earlier, and also could find his / her sales incentive payout enhanced.

A key component of this system is the ability to fund the potential payouts from the margins created by the enhanced sales and high customer service and customer retention.  The company believed strongly that the customer retention / satisfaction focus on the base would allow the organization to aggressively market and use testimonials in the attracting of new client organizations.  As of the end of the first quarter of 2012, the organization has paid out 8% in base pay adjustments, with 95% customer retention and satisfaction, and has also paid out 10% of base pay in sales incentives, with new customer sales at 75% of budget and current customer “up selling” at 90% of budget. Profit margins are low at 11%, but the company feels that without this program margins would have been nonexistent.

This is an example of the creativity a number of organizations are utilizing to drive success in a still uncertain economic environment.  The message is to examine ways to incentivize and reward sales staff on the key strategic objectives needed to keep the organization focused and primed for future success.

 

Michael F. Maciekowich is a Founding Partner of and National Director for Astron Solutions. His areas of expertise include the development, design, and implementation of executive, physician, and employee base pay, short and long term incentive programs, sales incentive programs and performance management systems in all industries. His primary focus is the integration of compensation and human resource strategies with organization-specific missions, visions, values, and strategic operating plans. Michael has thirty four (34) years of consulting and industry compensation experience. Prior to Astron, Michael was the National Director of Healthcare Rewards Consulting and the Metro New York Operations Manager for Rewards Consulting for the Hay Group. He was also compensation consultant with a number of consulting firms, including Towers Perrin (Senior Consultant), Hartstein Associates (Vice President), Adams, Nash & Haskell (Vice President), The  Omni  Group  (Vice President  and  Partner),  and  Modern  Management  (Senior Consultant). In these roles, he focused on the role compensation plays in human resources and labor avoidance strategies, assisting hundreds of organizations in the process. Prior to his consulting career, Michael was responsible for compensation services at the American Hospital Association, Honeywell International, and Zenith Electronics.