The Complexity of Measuring Sales Result
If a company has a mix of selling approaches, the question of who should get sales get credit for result is often complicated. For instance, it a sales force is specialized according to account size and territory, an account developed in a territory by one rep becomes another rep’s account if it grows very large. If the selling company also has a telesales crew that handles supply orders for all customers, the large customer could have been developed by one rep, assigned to another, and its supply orders could be taken by a third rep.
How should sales result be measured for compensation purpose when quotas are being set and measured against volumes? Determining credit in sales territories can bi difficult when national distributions take product from a supplier into a centralized warehouse and redistribute them to multiple locations. Several sales reps, from the supplying vendor and the distributor, may each deserve credit for some portion of the centralized orders brought into the distribution center. There are no hard-and-fast rules to follow to resolve this issue for measurement except to say:
1. get a good controller/accountant to help make assigned sales-credit calculation as unbiased and as reasonable as possible. Some calculation will never wholly dependent on, or tied to, income rewards. Reps are also motivated by other incentives, such as advancement in the company, praise, meaningful two-way performance appraisals, and constructive coaching.
2. choose sales measurement for compensation plan calculations that are available on a timely basis. Late sales reporting that holds up compensation check will make for a frustrated sales force.
3. select measurement that require as few complicated adjustments or calculations as possible. Reps should be able to quickly figure out their pay from “back of the envelope” arithmetic. If the rep needs software and a personal computer to calculate the performance-based portion of a pay plan, confusion and cynicism will result. Reps have to be able to keep score by understanding how their sales result directly translate into rewards. If they don’t understand the scoring system, they will not see the connection between their result and their compensation.
4. sell the pay plan formula to the sales force. If its got holes in it, they’ll find them. If its fair, they’ll react well to it. Plans that are somewhat imperfect in design but 100% accepted as fair and credible by reps are far superior to complex, “perfectly” engineered plans that nobody in the sales force really understands or accepts.