Variable Remuneration in 2018 to Achieve Sales Results: – Compensation is the main tool to motivate your salespeople. But not the only one, there are many formulas mixing the different solutions for getting good results in sales. This is one fact that 100% variable generates results quickly; the solution based on a portion of fixed salary allows you to control the action of your sales force. Wondering which option to choose? Let’s review the essentials to build the right system for your business.
Should we opt for 100% Variable Remuneration
- Obvious Benefits
The advantage of this solution is efficiency. If your goal is to quickly penetrate a market, the 100% variable will motivate salespeople with long teeth. Your budget will only improve. Which says variable, says no fixed charge? So no salary to pay if no sale!
An attractive organization at first but with some risks and not least! With this incentive compensation, the seller works his sector with a short-term view. He takes the business to earn commissions. The customer relationship is the main victim.
Another risk is to exhaust his team. Indeed, this method of remuneration requires a constant performance. An effort every day to fetch orders, otherwise, employees’ earnings will suffer. The pressure is therefore constant. For their livelihood, the personal interests of the latter may well outweigh the interests of the company.
- But also Limits
When the salesperson reaches a certain zone of financial comfort, his motivation is no longer to develop his business portfolio. He does not try to sell more but to maintain the level reached. He leads his sector as a good manager. There are nevertheless some parades … For example: to increase the objectives. Unfortunately, this is not easy because these profiles are fine negotiators.
The Magic Formula: a Mix of Fixed and Variable
- Take Orders
By choosing the right balance between fixed salary and bonuses / commissions, you have in your hands an excellent tool to steer your commercial action. The portion of compensation earned each month represents for the seller the long-term and qualitative work of loyalty. The incentive part is your driving lever. Indeed, by allocating relevant goals, you can push the product lines you want. Just insert them as criteria in the pay scales for women and men in the field.
- To do too Well
The classic drift is to add new criteria and new weightings from year to year to create a complex tool, especially if you work with a matrix products / markets. Everyone wants to promote their product or develop sales in their market. Salespeople find themselves at the center of internal competition with objectives that are too numerous, too precise. This is the limit of the system. It must remain simple to be effective.
- The Conclusion is Self-evident
In short, to set up the ideal compensation system, lay out the different alternatives. Analyze the advantages and disadvantages of each solution. There are two key questions to ask: Does this system create enough motivation within the sales teams? Does it enable the company to achieve its quantitative and qualitative objectives?
Ah yes! This post did not mention the 100% fixed … You understand that as commercial, it is unimaginable that they do not have financial incentives? Finally, do not forget that total compensation should not be lower than market prices. Without this, you are likely to spend your time, not in commercial management, but in recruitment!
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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