The choice of incentive compensation and performance indicators is essential to effectively translate your business strategy. They must be quantifiable, available in your information system and reliable. Focus on the five main families of variable pay compensation indicators that can be used as a basis for calculating the incentive compensation of your teams.
The business volume of a business is the aggregate of its sales and service flows during a performance period that may be monthly, quarterly, or annually. Three indicators measure or evaluate it:
The volume of business (or its indicators) is the primary support for calculating and determining commissioning or the bonus on purpose.
It is therefore important that you have a well-designed evaluation grid that allows you to take stock, at the end of each week, month or quarter of sales, of the figures obtained by each of your sales representatives. You will then vary their variable incentive compensation according to the results they have obtained with a multiplier defined in advance or via a pay curve that is materialized by a scale.
Profitability includes a family of index to determine the profit from each euro included in the turnover of a company. There are several, but the most commonly used ones are as shown below:
The calculation on the achieved margin is often used for salesmen or managers in order to limit the temptations to lower the prices of sales and discounts to optimize the turnover. Indeed, it allows to push the employee to be compliant with the company profitability objectives.
What market share did your sales staff gain during the last fiscal year? Have they faced strong pressure from your competitors? Have they been able to convince customers easily and get a better positioning for your products and services? The answer to these questions can be found in the various indicators or indices of evaluation of competition.
Obviously, by manipulating this type of particular indicator, you will need very accurate market data. Indeed, these data must be available at the lowest level of your sales force and be consistent. Do not hesitate to get closer to the marketing department to obtain this data and judged its reliability. These indicators will therefore often be used on collective compensation criteria, but will be less motivating.
Your salespeople look for prospects on a daily basis so that they become loyal customers of your company. In order to evaluate their performance in this fundamental area of the commercial function, you will be able to serve:
These indicators can be applied to calculate the incentive compensation of any commercial agent who is in direct contact with customers in the field, or via his communication network.
Customer satisfaction is essential to ensure the conquest of new market shares and the increase of your sales figures. Measuring or evaluating it may at first glance seem rather delicate, because it is a qualitative and not a quantitative concept, as in the case of the four families of performance indicators mentioned above.
However, there are simple indicators to get there without difficulty. It is in particular: