Compensating the Sales Force : A Practical

Compensating the Sales Forceis a uniquely jargon-free, how-to guide to all major sales compensation concepts and formulas. Using real-world examples, guru David J. Cichelli: Helps readers select the right compensation strategy for their firm Provides step-by-step guidance to implementing various approaches Simplifies the mathematical formulas that are a thorn in most manager's side

David J. Cichelli has 20 years of experience designing sales compensation packages for companies large and small, including Verizon, Charles Schwab, FedEx, and Hewlett Packard.

Acknowledgments

xi

Preface

xiii

1. Why Sales Compensation?

7

(6)

The Role of the Sales Force

1

(1)

Why Sales Compensation Works

2

(1)

The Power of Sales Compensation

3

(2)

Job Content-The Source of Sales Compensation Design

5

(1)

Sales Jobs and Sales Process

5

(4)

Sales Compensation-Paying for the Point of Persuasion

9

(1)

Sales Force Obsolescence and Sales Compensation

9

(2)

The Impact of Customer Relationship Management

11

(1)

Summary

11

(2)

2. Sales Compensation Fundamentals

13

(22)

Variable Compensation Models

13

(3)

Income Producers versus Sales Representatives

16

(4)

About Sales Compensation Concepts

20

(1)

Sales Compensation Design Elements for Sales Representatives

20

(1)

Eligibility

21

(1)

Target Total Cash Compensation

22

(1)

Pay Mix and Leverage

23

(3)

Performance Measures and Weights

26

(2)

Quota Distribution

28

(2)

Performance Range

30

(2)

Performance and Payment Periods

32

(2)

Summary

34

(1)

3. Who Own Sales Compensation?

35

(8)

Sales Compensation Program Ownership

36

(1)

Program Accountabilities

36

(2)

Assignment of Program Accountabilities-Large Sales Organizations

38

(2)

Using Committees

40

(1)

Sales Compensation-The Process Manager

41

(1)

Summary

42

(1)

4. Why Job Content Drives Sales Compensation Design

43

(16)

Job Content Drives Sales Compensation Design

43

(1)

Sales Job Components

44

(3)

Sales Job Type Inventory

47

(8)

Job Levels

55

(1)

Job Design Errors

56

(2)

Sales Compensation Practices by Job Types

58

(1)

Summary

58

(1)

5. Formula Types

59

(46)

Illustration Formula Payouts with Sales Compensation Formula Graphs

59

(1)

Two Major Seller Categories

59

(7)

Seller Category: Sales Representatives

66

(1)

Starting with a Target Incentive Amount

67

(1)

Calculation Engines: Commission versus Bonus

68

(2)

Sales Representative Sample Plans

70

(10)

About Link Designs

80

(6)

Providing Equal Earning Opportunities When Territories Are Dissimilar in Size

86

(3)

Bonus Formula

89

(6)

Bonus Linked Designs

95

(5)

Formulas for Sales Teams

100

(1)

Dedicated Sales Teams

100

(2)

Opportunity Sales Team

102

(1)

Using Base Salary Only

103

(1)

Summary

104

(1)

6. Formula Construction

105

(28)

Fundamentals of Sales Compensation Formulas

105

(3)

The Economics of Income Producers

108

(2)

Advanced Thinking about Income Producer Commission Rates

110

(3)

Constructing Sales Representative Formula

113

(5)

Formula Construction Worksheets

118

(13)

Summary

131

(2)

7. Support Programs: Territories, Quotas, and Crediting

133

(18)

Territory Configuration

134

(5)

Quota Management

139

(6)

Sales Crediting

145

(5)

Summary

150

(1)

8. Administration

151

(10)

Administration Components

151

(8)

How to Avoid Unnecessary Administrative Burdens

159

(1)

Summary

160

(1)

9. Implementation and Communication

161

(12)

Implementation

161

(3)

Communication

164

(6)

Summary

170

(3)

10. Program Assessment

173

(8)

Strategic Alignment

173

(3)

Employee Motivation

176

(1)

Best Practice Variance

177

(1)

Return on Investment

178

(1)

Program Management

178

(2)

Summary

180

(1)

11. Sales Compensation Design

181

(8)

The Sales Compensation Design Process

181

(1)

Ten Steps to Sales Compensation Design

182

(4)

Summary

186

(1)

Closing Notes

187

(2)

Appendix A Illustrative Sales Compensation Plan

189

(16)

Introduction

189

(1)

Section 1: Plan Overview

190

(1)

Section 2: 20xx Sales Compensation Plan Components

191

(1)

Section 3: 20xx Sales Compensation Plan Policies and Definitions

192

(3)

Appendix: 20xx Sales Compensation Plan and Calculation Examples

195

(10)

Appendix B Sales Compensation Surveys

205

(2)

Appendix C Software Vendors-Sales Compensation Administration Software

207

(2)

Index

209

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Compensating the Sales Force : A Practical Guide to Designing Winning Sales Compensation Plans

Summary

Author Biography

Table of Contents

Supplemental Materials