Your plan should attract, retain, and motivate top salespeople to produce at a desired level of sales at a cost that generates profits and desired rate of return on sales expenses and invested capital.

The total direct compensation package must reflect the complexity of the sales process. The mix between at-risk or performance pay and salary or fixed pay must reflect the general organizational objectives, the type of salesperson, the salesperson’s influence on the sale, and the type of product or services sold. In addition, an effective package must reflect superior sales performance. On the basis of your strategic plan, and to meet organizational goals, look to reward those who perform at a higher level in the areas that are most important. Some methods for doing this are:

• Advantage. Straight salary provides the sales professional with a consistent income and alleviates the pressure to produce more and more orders. A salary plan emphasizes the importance of nonselling activities, encouraging the salesperson to concentrate on customer relationship building or servicing activities. Because payouts are the same for each period, this form of salary plan is the easiest to administer, and sales expenses are easy to forecast.

• Disadvantage. This plan, by itself, does not drive sale closure behavior, shortened sales cycles, new product introductions, and market penetration or expansion.

• Advantage. Bonuses are an excellent approach to rewarding positive actions and superior performance. If paid quarterly, rather than annually, they allow for a more concentrated focus on desired behaviors that are needed in any rapidly changing market. Some examples of a desired focus might be number of new accounts, increased product portfolio mix across customers or target markets, increased gross margins, percentage revenue growth, cross-organizational team activities, specific skills (i.e., financial, technological, or negotiation skills), call reports, etc.

• Disadvantage. Many sales people feel that a bonus program does not accurately reflect the realities of their territory or accountability. This is based on a belief that the data to which the bonuses are tied are unreliable, distorted, uncontrollable, or delayed or old. Unfortunately, this is often the case.

• Advantage. Benefit plans are not only a valuable compensation-added incentive for attracting and retaining talent, they have become a necessity for the average employee. By providing a menu of benefits, such as insurance and education packages, the organization is providing the salesperson with a highly flexible, and personally adaptable, compensation program that will meet their individual needs and wants. This program often reduces the turnover rate when it is tied to increases in years of service.

• Disadvantage. The primary disadvantage to this is the cost of procuring and administering these benefits.

One other point on this form of compensation: Check with your HR and accounting departments to determine the tax ramifications of both the benefit plan and the expense reimbursement plan. In some instances, the packages can result in additional tax burdens on the sales professional