Solid sales effectiveness metrics are crucial for pay for performance

sales effectiveness metrics

By Brian Thompson,

When employees do not feel like their value at a company is reflected in their compensation, they may look for other higher paying positions. As an important part of employee management, companies need to be able to connect compensation with performance because as the job market heats up, it becomes more important to keep talented staff by offering them pay that matches their profitable performance levels. However, there are mistakes employers can make when it comes to pay for performance, and one of the biggest is not having solid metrics that prevent companies from giving star workers too little compensation or providing ineffective workers with too much.

About one-third of companies in the U.S. said compensation aligned with performance or productivity objectives, according to a survey by employment agency & recruitment firm Kelly Services.

The survey revealed this number could grow as 40 percent of respondents who said their companies lacked pay for performance programs said they could increase their productivity if their earnings were comparable to their performance. 

With the role of incentive compensation expanding to increase retention rates and employee engagement, employers should watch out for signs that employees are not satisfied with their current pay level and incentives. The survey found about 4 in 10 employees said their current pay is fair. 

"Performance-based incentive plans can be a win-win situation," Steve Armstrong, senior vice president and general manager of U.S. operations for Kelly Services, said in a statement. "Employees can benefit from the opportunity to work smarter and raise their earnings capacity, while employers benefit from increased productivity and a more engaged workforce."

Importance of staying focused with performance metrics
Incentive pay is often standard in sales with 68 percent of sales firms saying they offered performance-based pay, according to the survey. In order for pay for performance to have the most impact at encouraging positive outcomes and ensuring businesses are one step closer toward their goals, companies need to accurately measure key sales performance metrics. 

Companies regularly use pay for performance when determining the compensation for CEOs, connecting CEO pay to the outcomes detailed in annual financial reports. However, companies that lack focus may find themselves underperforming compared to competitors, according to The New York Times. Businesses should be able to create metrics based on their business goals and desired outcomes and stick to these key performance indicators to make sure all staff at the company - from the top executives down to the main workforce - are on track for success.

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Brian Thompson