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The incentive plan
for the sales team is an important part of the human resources management. ¡°Pay for Performance¡± should be a leading
idea for different incentive plans.
Two principles
should be found in every incentive scheme:
1. The better one
achieves, the more one gains
2. Open and
justness
Some incentive
plans are outlined below for reference:
1. 100%
annual pay /monthly pay
Before the sales
employee commence his/her responsibility, most of the income have been
identified. The 13th or even 14th month salary is paid at
the end of the year. Expenses on
travel, transportation and telecommunication are reimbursed. Additional allowance for meals and accommodations
are provided. Promotion, job-rotation, training and commendation are
supplementary ways.
Essential: Acknowledge
the personal value before proven
Hypothesis premise:
a human being, as a commodity, has value itself. Among all the resources of an enterprise, human being is the most
important. If an enterprise wants to
use it, she must pay to buy it. The
cost is shown as the salary.
Applicable
conditions:
- A start up
environment, i.e., to develop new clients; the development plan works well
- Within
industries selling technological products, i.e., aviation or machinery
- When
launching a new product
- For those who
engage in clerical work, i.e., provide training to the sales force
- Participate
in trade fairs
- Well
established companies; the sales team engage in client relationship maintaining
- Those
high-invested company with high reputation; the sales revenue mainly comes from
the company¡¯s investment
- Service
oriented or teamwork sales
- Senior sales
managers who engaged in major clients and sales team management
Advantages:
- Will
encourage the sales people to foster long-term clients
- Can attract
good sales people; keep the sales team stable; and make sure of the continuity
of the work and the personnel
- Can provide
the sales people the sense of security and attribution; increase their satisfaction
and develop their loyalty to the company
- Stress on the
long-term exploitation and maintenance of the market and the sales process
management
- Make it easy
to change the sales people¡¯s work scope or quote or to re-assign the work
Disadvantages:
- Salary is
often connected with qualifications (rather than the performance), which may
give rise on bureaucratism and lessen the motivation of people with potential
- Make it
difficult to praise the good and punish the bad; foster the sales people¡¯s
laziness, i.e., the sabotage, low efficiency, etc.
- The increase
of labor costs
- No good for
the development of growing enterprises
- Ignore the
market management and give rise to the turmoil in price and channels
2. 100% pay by incentive
The
payment to the sales people is calculated by a certain percentage of the sales
revenue. It is based and only based on
the performance. The proportion is
unusually 8% to 10% of the sales revenue, with the maximum of 20%. All the expenses on travel, communication,
and promotion fees are included.
Essential:
rewarded after devotion.
Hypothesis
Premise: human being can only produce value through his/her work; no pay, no or
little gain.
Applicable
conditions:
- Companies
just start or in their primary developing stage, the main task of the sales
people is to develop new clients
- Low-investment
companies, whose revenue mainly come from the frequent visited clients, i.e.,
small enterprises and private enterprises
- When the
sales people need to face consumers directly; or when selling skills and
personal relationship play an important role in the sales
Advantages:
- Will lessen
the input for sales
- Can reduce the
operation risk, called ¡°share the risk as well as interests¡±
- Attract good
performance sales people
- Can make full
use of the sales people¡¯s potential; increase the sales revenue quickly
Disadvantages:
- The
shortsighted activities of the sales people, i.e., only pay attention to expand
the sales revenue and promote high-value projects while ignore developing long
team clients and promoting products which are difficult to sell
- It is no good
to attract and retain people; once there are changes in the market, which make
sales difficult, sales people may feel unsatisfied and some good ones will go
to other companies or industries
3. The combined scheme
Combine the
advantages of the previous two schemes, and design the mixed incentive scheme
according to the conditions of the company.
¡Ì low base
salary + high premium
Payment =A
(Allowance)+B (Quantity Incentive)+C (Quality Incentive)
A: The allowance
for basic business development to cover basic living requirements, including
living cost, communication expenses, subsidy to meals, post allowance, etc.
B: the part based
on the quantity of sales
This part makes
the sales performance directly reflected from the salary.
C: the part based
on the quality of sales
It is an important
part of selling process management. It can ensure the sales amount and solves
the problems of sales team management, i.e., channel management, price system
management, client relationship management (CRM), information feedback, working
attitude, customer satisfaction management (CSM), etc.
For example:
Both B and C use
the cumulative scoring system. 1 score is worth RMB100.
If the sales
people get the full score, B+C=100 (score), B: C=70: 30
P=A+[actual sales
amount (revenue)/planned sales amount (revenue) X 70 + the total score of C
(¡Ü30)] X RMB100
¡Ì high base salary + premium +bonus
P=A
(Base)+ B (Premium) +C (Benefit)
A:
base salary, graded annual salary/monthly salary
B: monthly/
quarterly assessment and incentive
-
Monthly/quarterly
sales index assessment
For example, if more than 80% of the target
has been completed, 1% of the excess part will be given as incentive; while if
the completed part is less than 80% of the target, 0.5% of the deficit will be deducted
from the salary
- Assessment of
daily activities, including the sales sheets, work report, sales spots
maintenance, clients relationship maintenance, new customers development,
competition information report, after-sales services, expense control, payment control,
team management, etc.
For example, assess each item and each point, each
item get different weight of scores. Those
who are not qualified can¡¯t get the full sum of bonus
C. Annual
assessment and incentive
- Yearly target
assessment, including the yearly comprehensive sales target, regional sales
target and targets on each product
For example, after completing 90% of the target, 0.5%
of the excess can be given as incentive
- Yearly
comprehensive assessment: the overall working ability, working attitude, team
spirit, inter-personal skills, communication skills, specialty knowledge,
marketing ability, leadership, strategic thinking, and the ability to plan and
organize
For example, assess each item and each point, each
item get different weight of scores. Those
who are not qualified can¡¯t get the full sum of bonus
4. The scheme to stimulate an individual in
a sales team
A good team can
provide the 1+1>2 effect. Designing
an incentive scheme, which can both motivate individuals and enhance the
teamwork.
Hypothesis:
Suppose the total
incentive is 1, A is the part for individual efforts, B is the part for the
small team, i.e., department or division, C is the part for the large team,
i.e., company or business group, then A+B+C=1.
Advantages:
- Respect
individual¡¯s value, and the team¡¯s benefit as well. Excessive competition between individual is avoided. The target of the team can be achieved
- Take
individual¡¯s contribution to the team into consideration. Even if the individual doesn¡¯t achieve
his/her target, he/she can get certain incentive from the performance of the
team. The disadvantages caused by ¡°only
those with good performance are hero¡± are avoided
- Scientific
and fair
¡Ì 721 -
assessment model
Suppose: A: B: C =
7:2:1 (or 5: 3: 2, 6:2:2, etc.)
For example: A
company adopts the reward scheme of ¡°base salary + premium¡±. Upon the
completion of the sales target, the premium for each excess product is RMB100.
There are 5 sales people in Division I and totally 20 sales in the company. The
excess sales amount for the whole company in July is 1200 units, among which
350 are from Division I with Mr. Wang ¡®s contribution of 80; Mr. Wang¡¯s base
salary is RMB6000.
The direct individual
premium: RMB100 X 70% X 80 unit =RMB5600
The indirect
premium for the team performance: RMB100 X 30% X 350 unit / five persons = RMB2100
The indirect
premium for the company performance: RMB100 X 20% X 1200 unit / 20 persons =RMB1200
The total premium:
RMB5600 + RMB2100 + RMB1200 = RMB8900
The income for Mr. Wang in
July is: RMB6000 + RMB8900 = RMB14900
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