Benefits and Compensation

Finding Best Incentive/Base Mix—The 13 Job-Specific Factors

DiMisa, Senior Vice President, Sales Effectiveness Practice Leader for Sibson Consulting, is author of the best-selling business book, “The Fisherman’s Guide to Selling.” He offered his tips in a recent webinar sponsored by BLR/HRhero.

Use the chart below, DiMisa says, to evaluate the job factors in the middle column and decide on the appropriate mix of base and incentive.

More base/
less incentive when the factor is …

Job Specific Factor

Less base/
bore incentive when the factor is …

High

Market Share

Low

Finite

Market Size

Infinite

High

Customer Acceptance of Product

Low

Repetitive and Predictable

Buying Pattern

Few/One-of-a-Kind

High

Sales Support

Low

High

Non-Selling Activities

Low

Frequent

Team Selling

Never

Low

Risk Taking

High

Known

Customer Profile

Unknown

Farmers

Job Definition

Hunters

Low

Control Over the Sale

High

Low

Control Over the Sales Volume

High

High

Close Rate

Low

For example, with a Target Total Compensation of $100,000, the person on the left side of the chart might have 90% base and 10% incentive, while the person on the right side of the chart might have 50% base and 50% incentive.

However, typically, the person on the right would also have greater upside potential, that is, higher incentive for performance beyond the target. For example, the person on the left side might have an additional potential of $10,000 of 1:1 upside potential, and an additional $10,000 of 2:1 upside, while the person on the right might have an additional $50,000 in 1:1 and an additional $50,000 of 2:1.

Thus, the person with the high base (and low risk) has a total upside potential of $20,000 while the person on the right with higher risk has a total upside potential of $100,000, says DiMisa.


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What Performance Measures Are in Use?

Eighty percent of participants in a recent Sibson survey use revenue as a performance measure in compensation plans, with profit or margin a distant second at 46 percent.  

Performance Measures Included in
Direct Sales Incentive Compensation Plans

Measure

Percent

Revenue/Sales Volume

80

Margin/Profitability

46

MBO

38

Strategic Products

31

Units

20

Customer Satisfaction

15

Other

23

“Other” performance measures used include product mix, quarterly consistency, discount, budget, and individual challenges.


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Use of Stock Grants or Restricted Stock

Overall, the use of stock grants has decreased for sales people, says DiMisa, but it appears to be increasing in 2012. Most reps say, Just give me the cash. Most sales organizations are restricting stock grants to director level and above.

In tomorrow’s Advisor, why SPIFs are like whalewatching, plus great news—your jobs descriptions are updated and ready to go.

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