Evergreen’s holistic approach to strategic pricing and customer profitability analysis often leads to discussions with clients about ways to link sales compensation to operating profits and company objectives. Compensation based entirely on top-line sales or gross margins may not be the best method in today’s distribution environment.
If the incentives are geared toward top-line sales or gross margin dollars instead of actual net profits, the sales team has a much greater financial incentive to chase sales and gross profit dollars rather than being concerned with net or operating profit dollars. We think you should pay reps less for quantity and more for quality.
Sales compensation plans should help attract and retain the best and brightest sales professionals. This means rewarding sales reps more for their successes than for their efforts. Sales compensation should be closely linked to the company’s objectives and to results that the sales rep has some control over. To the greatest degree possible, compensation plans should be as simple as possible. Based on our experiences as distribution practitioners and from working with our clients on their sales compensation plans, we know that frequent or dramatic changes to compensation plans can be disruptive and lead to undesired turnover. Evergreen can design and help put creative new sales compensation plans in place.
Proactive inside sales teams are becoming more prevalent in the current era of multichannel marketing. Specific sales compensation programs for different types of sales roles are needed to provide appropriate compensation for all sales professionals. The best compensation plan for your company will be one that’s as simple as possible, offers realistic income opportunities for salespeople, and is tied to your operating profits.
Sales compensation plan changes must be made with great care, taking into account data as well as culture. Transitioning to a new plan should be managed thoughtfully and sales professionals should be given ample time to make the necessary adjustments to preserve and build their income.