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incentive plan design

A large division within your organization is the inside sales team. Currently there are 60 sales representatives and that number is growing. The Vice President of Sales and Marketing has come to you, as Director of Compensation and Benefits, to request a review of the pay structure for his staff. He has been given the directive to increase sales volume so that the company may continue to grow and achieve its goals. He has asked for your recommendations on an incentive plan that will increase performance.

When he requests work from an outside department, this VP always wants to make sure he agrees with how something is done, as well as the desired result. Write a 2-3 page proposal to the VP explaining the process you will follow to determine what incentive plan would work for a sales organization. Detail the factors you would consider in your review. Propose your recommendations for an incentive plan design. Specify the end result you would expect to achieve.

Solution Preview

First of all, the key consideration in the design of incentive plan for the sales team is that the sales representatives should clearly understand the incentive plan, as well as clearly see the connection between their performance and the rewards. In other words, it is extremely essential to obtain the support for the plan from the sales team in order to make it really effective. If the plan will be confusing and ambigious and not supported by the sales team, it will fail to bring desired results. Therefore, we will need to work closely with the sales team to ensure their cooperation in the ultimate implementation and success of the plan.

Incentive plans fail when the structure is targeted too broadly and not focused on individual people or teams. The typical profit sharing plan where it is "one for all and all for one" does not motivate anyone. This type of profit sharing becomes an entitlement. Also, the productive employees will resent that the poor performers. Employees need to have a clear understanding of the linkage between their effort and their incentive compensation. A well-designed employee incentive compensation plan will make each department or individual focus on things they can ...

Solution Summary

Propose your recommendations for an incentive plan design. Specify the end result you would expect to achieve.