I am planning to hire some sales professionals for the first time. Can you brief me on how to set targets and bonus scheme?

Mr Omar has covered the topic well. Agreed with him

It all depends on the products or service profit margin and the frequency of selling.

targets and bonuses is a standalone science and require an experienced subject matter expert to enable the new sales team to make money and prevent loss on the company.

There is no set rule, every industry, service and or product and market create many variables that make the business owner make different settings.

Usually, when you set a target bare in mind to make it achievable

 

Bonus Scheme options

The number of features involved in the design of a bonus scheme means that there are a significant number of permutations to choose from.

Feature 1 Operating levelA bonus scheme or employee rewards strategy can operate at any one or any combination of the following levels:

• Individual Bonus Scheme
• Team Bonus Scheme
• Site Bonus Scheme
• Corporate Bonus Scheme

In theory a company could operate a scheme at any one or more of these levels. The constraining factor however, in any bonus scheme, is cost.

Feature 2 FactorsBonus schemes can be based on a single factor or a range of factors. Single factor schemes allow special focus to be put on a key target or business objective. This may be of ongoing importance, such as profits or productivity, or a matter that needs particular short-term attention. Multi-factor bonus schemes take in a wide range of factors and may include targets at a corporate level in conjunction with targets aimed at particular departments or teams. A similar outcome may be achieved by using a number of single-factor or single-level schemes.

There is a wide range of factors that can form the basis of both single- and multi-factor bonus schemes. These include:

• Productivity and output
• Quality
• Safety
• Cost Management
• Financial performance/profits
• Sales
• Customer Service/satisfaction
• Attendance
• HR-Related measures
• Project Work Targets
• Team working
• Individual Performance

Productivity and Output Bonus SchemesProductivity bonus schemes and output bonus schemes are mainly used in manufacturing, e.g. piecework (where employees are paid according to the number of pieces or units they produce ), but is being used increasingly in other sectors e.g. to measure the time taken from receiving details of a job to completing it. In this type of circumstance of course, good productivity also equates with good customer service.

Quality Bonus SchemeAgain quality bonus schemes are relatively predominant in the manufacturing sector; it’s easy to measure quality as the number of defects found per day, week or month. However, the Service sector also uses quality as a factor e.g. setting a target for the level of data capture accuracy each month or measuring critical success factors.

Safety Bonus SchemeHealth and safety is most likely to feature as a factor in bonus schemes in manufacturing or other contexts where the perceived risks are highest.

Cost ManagementGain-sharing bonus schemes particularly focus on cost reduction and efficiency savings. Gain-sharing is a formula-based type of bonus scheme that enables employees to share in the financial gains and efficiency savings made by a company as a result of improved performance. The formula determines how the gains are to be shared between the company and its employees.

Many financial services organisations have bonus schemes based on the collection of bad debts.

Financial Performance/ProfitsA significant proportion of companies have bonus schemes based on financial targets (e.g. net asset growth) and some are based solely on profits.

SalesSales revenue commonly features as a factor in bonus schemes operated by service sector companies, particularly retail and financial services organisations.

Customer Service /SatisfactionThere is a growing tendency to include customer service measures in bonus schemes. This is particularly the case in retail and elsewhere in the service sector. Public sector organisations also increasingly link bonus payments to their customer service targets e.g. processing 99% of documents within 5 days of receipt and responding to 90% of telephone calls within 20 seconds. The bonus scheme can also be based on performance against a number of customer service targets.

A number of organisations measure customer satisfaction through surveying customers, customer comments/feedback cards or “mystery customer” visits.

AttendanceAttendance is often one of the measures included in multi-factor bonus schemes, usually as an absence rate at site, divisional or team level.

Some organisations still continue to operate single-factor bonuses to reward individual employees for “perfect” or “full” attendance, usually measured over a week or a month and with resulting payments ranging from £10 per week to £800 per annum or 5% of salary. However, too many exemptions or valid reasons for absence can undermine the rationale for an attendance bonus. This has no doubt played a part in the decision by a number of companies to phase out attendance bonus schemes or consolidate them into basic pay.

Many companies have chosen to use “absence triggers” for bonus scheme payments regardless of whether sales targets are being met, to receive a bonus payment. Other companies pay out full bonuses, proportions of bonus or no bonus depending on the number of instances of absence or where the individual is in their absence management procedure.HR-related Measures

HR-related targets in bonus schemes are sometimes set for managers. These may, for example, cover staff training and development targets and employee morale.

Project Work TargetsBy operating bonus schemes based on multiple factors, targets can be included in a scheme that are tailored to particular projects falling within the bonus period – providing incentives for completion to deadline, specification and cost. An organisation can base, say 20% of its gain-sharing plan on input measures, which include the completion of projects on time and development of new strategy.

Team Working Bonus SchemesEffective team working can be a factor in a bonus plan. This factor can also be used as an element of individual performance. Most companies use teamwork in their competence framework or as a core competence which is rewarded through performance/contribution pay.

Individual PerformanceIndividual performance can be included as a factor in its own right, being derived from performance appraisals or separately measured. Many companies, especially financial services sector, use individual performance to measure the individual element of a multi-level bonus scheme i.e. bonus schemes which reward corporate, team and individual elements.

If employees are rewarded through performance pay and bonus for individual performance then this would be referred to as double-loading, paying twice for the same result. It’s advisable therefore not to use individual performance as a factor in a bonus scheme if the company has performance pay unless you are measuring different aspects of individual performance.

Bonus PaymentsMost companies are self-financing, using profits, sales or cost savings to create a bonus pool which is distributed among employees in a variety of ways. The frequency of these payments varies and often depends on the objectives of the scheme. However, before any payments are made, qualifying hurdles or minimum target levels may have to be met.

Feature 3 Distribution of the Bonus PoolBonuses may be paid as an equal flat rate or as a percentage of salary across a department, site or company. Payments may be further differentiated in the following ways:

• Vary by grade or role
• Reflect individual performance
• Be based on team performance

Feature 4 Frequency of PaymentsThe frequency of payments varies from weekly to annually and is linked to the objectives and types of bonus scheme operated. Most companies make payments on an annual basis because they have linked their bonuses to annual profit targets.

In some contexts, shorter measurement periods and regular bonus payments may have a greater motivational impact. Conversely, the longer the bonus period, the more scope there is for making a significant lump-sum payment that stands out more from basic pay. Interest in a bonus scheme that measures performance over a longer period can be maintained by communicating progress against targets to employees on a regular basis. An annual bonus payment can also act as a retention tool, although there is likely to be a surge of leavers immediately after bonus is paid.

Feature 5 HurdlesMost companies only make payments from their bonus schemes if certain hurdles are overcome:

• Minimum targets for all factors – if these minimum targets are not reached then there is no bonus pay out for these factors
• Threshold profit level – most of the profit related bonus schemes fully or partly based on financial measures include a threshold profit level that must be reached before any payments are made.
• Absence triggers – many companies have chosen to use “absence triggers” for bonus payments regardless of whether sales targets are being met, to receive a bonus payment from the scheme.
• Management Discretion – organisations often maintain a degree of discretion over the payment of bonuses e.g. the board may reserve the right not to make bonus payments if a serious lapse, such as a major health and safety incident occurs on site or not making bonus payments if financial objectives or critical success factors are not met.

You must identify the selling goals you want to achieve firstSecond, the necessary means, tools and budget must be provided to achieve these objectivesThen the reward and commission system is established based on the goals set in advance

Thanks

Well

Target and bonus have the same path which means if the target been achieved, so the salesman deserve the bonusi.g : your target is to sell 100 piecesbonus scheme: 100 sold pieces = bonus %50                              150 sold pieces = bonus %75                             200 sold pieces = bonus % 100Do not put achieving target = full bonus, in order  to encourage your employees to achieve more and, rise their ambition.

 

Dear Tamara first of all you din't tell what kind of business you are going to start any ways, If you are hiring SPs for any length of time, you’ll know many SPs see commission only jobs as temporary. You’ll probably need to be recruiting constantly to keep up with the turnover in your sales staff and teams. We can help you find good sales professionals in the first place, but you should streamline your hiring process as much as possible. Remember to replace low-performing reps quickly. You or your sales Manager have to visit with them and have to do joint visits and Rectalks with them twice in a month for every sales rep.you have to make promos and reward base Compitition like QSP (Quater sales Perfomance) rewards like Incentives in the shap of cash or three days holiday trip visit in the country or out side the country .Reward will be given from the sales profit of the sales team account second way incentive can pay in the shap of bonuses at the end of the year Perfomance 1 percent incentive from the total sales done by each sales person job should be Consist on Salary + Commission

Hello Mrs Tamara First I like to know in which field you are going to hire

they must be on know about what they sell well. 

and they have to be trained well. when they trained well you be able to judge on their sales.

set the target gradulally from the minimum to the maximum. and encourage them by promotions and bounses. all of us work for life to earn money to keep life better. 

Hi Tamara, Thank you for getting in touch and too for the belief that I would be of some help. Coming to your inquiry, it would have been more beneficial for me if you also gave detail of the industry and product portfolio you are dealing in and also which Market. I will however still give you a few notes to consider as you seek to set a profitable business. 1. Look at the business business capability in terms of production capacity 2. What is your market coverage 3. Who and how big are other players in the same business lines 4. Cost of production, taking into consideration materials costs, Labour costs, warehousing costs, logistics costs, taxation %ges, cost of distribution, Insurance cover costs, remuneration vs statutory obligations. Once you have developed your value chain looking at those outlined and other costs, you could now put a growth mark of between 20% to 30% annually depending on other market indicators. Sales targets will also come from your segmentation of the market you intend to trade in, ie deviding of a given market into equal sizes of 4 and allocate the national or universal target into four (4) equal or measurable apportions to fit the whole. Sales teams are insentivised differently in different Countries, bit it should always be that their pay leaves the company with a positive ROI (Return On Investment) of at least upto 15%. Let me know if this is helpful or if you may consider sharing with me the market you wish to trade in, the nature of goods or services and also if there are any statutory regulations governing remuneration in your market or indeed preferred market. Regards, PROGRESS Moonze-Zambia

Sales People are made to acheive targest, targest depends on the company products, if compaany is selling insurance products then targets to number of policies to be sell in a month, for freshers target may be on lower side and for experienced person to be expect more.

Bonus to be paid once in a year, at any time. It may be full wages to be paid.