Sales People Should Avoid "Out and Back" Trips

Sales people need to be efficient in how they cover their territories. Too often they will need to speak with a particular customer and will drive out to see them and come straight back to the office or head to another customer location on the opposite side of their territory. This is an example of a sales person who is not planning their days well. Territory coverage is an important part of selling and profitability. Most sales people are not disciplined enough to do it well. But traveling to make one call rarely makes sense. When a sales rep needs to visit a customer location, he/she should make a concerted effort to make other calls in the same trip. There should be a plan prior to leaving home or the office.

The Cost Of Marginal Employees

When it comes to discussions about enhancing profits, most managers and owners seem to focus on trimming expenses, increasing sales and bumping up prices. For some strange reason they seem to ignore or minimize the impact that marginal employees have on their bottom lines. Marginal employees cost many companies thousands of dollars every day in ways that are not always obvious. Marginal employees can make more mistakes, they can alienate customers, they can alienate fellow employees, they can be inefficient in their work, they can produce less and they generally don't offer the same level of overall contribution to the business. But many, many businesses continue to hire and retain marginal employees. The hiring processes are poorly defined and/or careless and managers are not well equipped to manage. The cost of marginal employees is tremendous. It is an area that should receive first priority in any business. How many marginal employees who will probably not improve performance enough through training or coaching does your organization employ?Tuesday

Individual Planning Is Important Too

It is critical for employees to plan their work and plan ahead. Too often an employee's focus is disrupted by the many activities and tasks that face them on a daily basis. It is important to have a plan of attack in terms of what tasks must be accomplished by when. This means that prioritizing work is an important factor in staying focused and in accomplishing what needs to be accomplished in a timely manner. Without individual planning an employee's day tends to be chaotic and unproductive. If possible, break the day into manageable time slots and fill those in with the tasks that should be completed. Try to complete the most important tasks or those with more urgent deadlines first. As the day goes by, the time slots might need to shift due to unplanned activities or interruptions. At any rate, try hard to plan your work and stick to the plan as best you can. It will pay dividends in terms of increased productivity and reduced stress.

Design Sales Compensation Plans Carefully

We've all heard the notion that money is not a primary motivator of people. We're here to dispell that notion, especially as it relates to your sales force. While a number of factors enter into the motivation equation, compensation certainly ranks near the top for sales people. In fact, someone not motivated by money might not be effective in a sales position.

But most companies seem to struggle when designing sales compensation plans. There are a number of questions that surround building the plan. Should we use a straight commission plan? Should it be a straight salary plan? What combination of salary, commission and bonus or other incentives should be used? There is no secret formula for designing an effective sales compensation plan and plans will vary somewhat based on the type of product or service being sold.

Many companies use a straight commission plan either because they believe that it will somehow save them money or delay cash outlays or because they believe straight commission motivates people more than any other form of compensation. Let's be clear about the fact that you simply don't want your sales force focused too much on how they are going to pay their bills. The age old argument that starving people makes them hungrier and makes them want to sell more is true to some extent. However, when an employee is more worried about where their next dollar is going to come from it can very often create undue stress which could lead to an inability to focus on the tasks at hand.

And what about a straight salary sales plan? In this case, where is the incentive for someone who is motivated by money and feeds off of receiving incentive payments based on performance?

We believe that a combination of salary, commission and bonus is usually most effective in compensating sales people. The question then becomes how to effectively blend all three into a sales compensation plan that will incent people as well as compensate them according to performance. One thing to keep in mind is that the plan needs to be kept as simple as possible.

An important point about compensating sales people is that unless you are willing to allow sales people to make a lot of money and potentially make more than some of your mid and top-level management people, you probably shouldn't be in business. There is a real reluctance on the part of some owners and managers to allow sales people to earn the kind of money they need to be paid to incent them to high levels of performance. This can lead to an inability to attract and retain top people. At the same time, you need to be very careful not to overcompensate them.

Also, sales compensation incentives should most often be based on gross profit rather than selling price, especially when sales reps have any control over final pricing. It is important to manage gross profits and tying commissions to selling price can negatively impact gross profits when sales reps have leeway in quoting prices to customers.

There is a reasonable level of compensation for sales reps that must be determined. Obviously you will want to have some control over how much top reps are paid. That control is established when developing the plan, not by making sudden changes in the plan after you realize top reps are making more than you intended. By control we mean a well planned and motivating compensation plan that incents reps to high levels of performance and pays them very well when they do perform, but does not overpay them.

First determine what you believe to be a reasonable level of sales for a top sales rep in your company. Be careful not to be selfish in making this estimate. Remember that sales people need to have the ability to make big money if they perform. But they must perform at a high level to achieve high levels of compensation.

Once you have carefully analyzed the situation to arrive at a reasonable level of compensation and the percent of gross profit you are willing to allocate to sales compensation, you're ready to begin putting the pieces of the plan together.