The 2020 Mid-Year Economic Update_long

Translating New Sales Incentive Plans Into Practice

In this era of uncertainty, how to best incentivize a sales force is likely top of mind for many distributors. A recent article at inc.com talks about the sins of commissions," and how sometimes, incentive plans devised in the corporate office don't always translate on the ground floor level.
 
Here's the link to that article.
 
The author quotes Harvard Business School professor Robert Austin, author of Measuring and Managing Performance in Organizations. He says that when you try to measure people's performance, you must take into account how they will react. A quote from ...

In this era of uncertainty, how to best incentivize a sales force is likely top of mind for many distributors. A recent article at inc.com talks about the sins of commissions,” and how sometimes, incentive plans devised in the corporate office don’t always translate on the ground floor level.
 
Here’s the link to that article.
 
The author quotes Harvard Business School professor Robert Austin, author of Measuring and Managing Performance in Organizations. He says that when you try to measure people’s performance, you must take into account how they will react. A quote from the article: “Inevitably, people will figure out how to get the number you want at the expense of what you are not measuring, including things you can’t measure, such as morale and customer goodwill.” Austin basically says that incentive plans based on measuring performance always backfire.
 
Michael Emerson of Indian River Consulting Group wrote in MDM in July 2007 that companies are often reluctant to change their sales compensation plans for three reasons:
 
Fear – Today’s dissatisfaction is tolerated because it’s perceived to be better than what might happen if change were attempted.
 
Misdiagnosis – Sales compensation program changes do not produce the expected improvements they expect because the program itself is not the real problem.
 
Lack of Awareness – Companies have a difficult time coming up with structural alternatives to the program that is currently in place.
 
He writes in the article: “There is no reason to accept a sub-optimum sales compensation program. By ensuring that strategic issues are addressed first, considering all appropriate structures and avoiding the common implementation pitfalls, any company can leverage the power of a modern compensation system.”

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