The best laid incentive plans by kerr hbr article

The bigger challenge is having the right systems in place to build it properly. Here are the six systems you need to have in place to write a useful management bonus program that will encourage your managers to earn their bonus: This is often overlooked when we talk about management.

The best laid incentive plans by kerr hbr article

Of all sales issues, compensation is probably the most discussed. It is now the focus of a vast and varied literature with enough folk wisdom and quantitative studies to satisfy most managerial temperaments.

Lost in this approach is a recognition that sales compensation is an area in which data analysis, values, and the motivation of complex human beings are inextricably linked.

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The emphasis of the sales compensation plan will affect the quantity and kinds of orders received by manufacturing, the cash-flow profile managed by finance, the recruitment and training needs faced by marketing and personnel, and the daily organizational interactions between sales and all of these other functional areas.

To make these decisions, managers need a preface to sales compensation which outlines the issues that must be addressed before worrying about the specific numbers or debating between incentive-based and fixed-salary plans.

In that spirit, this article provides the following: This view nicely emphasizes the importance of results—not just good intentions—in business. But it must not obscure the fact that compensation is primarily a motivational tool and, in most companies, an evaluation mechanism as well.

One can still design a sales compensation plan on the basis of results rather than process a separate issue which is discussed below. But at its most effective, compensation is a tool for achieving sales performance consistent with marketing strategy, a key means of guiding effort toward desired results.

This view has two important implications: Issues of compensation, evaluation, and motivation do not, of course, have strict cause and effect relationships. They affect each other in myriad ways that might most accurately be described as a web of relationships.

However, it is useful to risk oversimplification and consider them as links in a chain in order to illustrate certain relationships that tend to be ignored see Figure 1. Motivation is a core function of management.

One factor is the recruitment policies which influence the personal characteristics of salespeople e. Some people work harder than others, and some people are smarter than others. Training can account for and mitigate some of these differences.

But in most sales organizations, there is a range of personal abilities that must be selected, developed, and managed. Finally, a fourth factor affecting motivation is the perceived value of additional rewards.

Effort, results, and rewards may be linked, but salespeople may perceive the effort as disproportionately high relative to the rewards received.

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An outcome of motivation is effort, which, in sales, has two dimensions: Compensation plans influence both dimensions of effort.

Effort leads to results. The issue in sales compensation is deciding what goals should be established in an attempt to guide efforts toward desired results.

Some important choices in setting goals and rewarding results will be discussed in a later section. Having established goals, results must be measured, raising issues of the appropriate or feasible measurement criteria, the information systems available to provide the data for such measurements, and the process by which evaluations are conducted.

There are many possible criteria for evaluating sales performance.

The best laid incentive plans by kerr hbr article

Equally important, but often overlooked, is the process for administering the evaluations. At many companies, salespeople receive big bonuses for the results of their efforts. The result is demotivation or, perhaps worse, motivation toward the wrong type of sales effort. Finally, managers must consider the mechanics of the compensation plan —both type and quantity.

Both topics are discussed in the next section.Apr 08,  · The key is in developing a compensation and incentive plan that is attractive to all members of the sales force – from the worst to the best, and everybody in between!

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This blog posting will explore the various facets of sales force motivation. The emphasis of the sales compensation plan will affect the quantity and kinds of orders received by manufacturing, the cash-flow profile managed by finance, the recruitment and training needs faced by marketing and personnel, and the daily organizational interactions between .

Creating an employee retention plan is one of the best ways to combat high turnover. Learn how to craft a rock-solid retention plan that'll make your whole company happy in five simple steps.

A Preface to Payment: Designing a Sales Compensation Plan

According to the Harvard Business Review: 80% of employee turnover is due to bad hiring decisions. Goals should be neatly and clearly laid out. Jan 30,  · Managers don't have to go that route, but acknowledging their employees' work will make a huge difference to retention rates, as discussed in this Workopolis article.

“The Best-Laid Incentive Plans” HBR January Sep. 22 – Topic #4: Individual Values, Business Ethics, and Corporate Social Responsibility. Darren Dahl is a contributing editor at Inc.

magazine, which he has written for since He also works as a collaborative writer and editor and has partnered with several high-profile authors.

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