Appendix: Development of a Sales Commission Plan
A series of steps are required to establish the foundation on which a sales commission plan can be built. These steps are as follows : A. Determine Specific Sales Objectives of Position to Be included in Plan
For a sales commission plan to succeed, it must be designed to encourage the attainment of the business objectives of the component division. Before deciding on the specific measures of performances to be used in the plan, the component should review and define its major objectives. Typical objectives might be : * Increase sales volume * Do an effective balanced selling job in a variety of product lines * Improve market share * Reduce selling expense to sales ratios * Develop new accounts or territories * Introduce new products.
Although it is probably neither desirable nor necessary to include all such objectives as specific measures of performance in the plan. They should be kept in mind at least to the extent that the performance measures chosen for the plan are compatible with an do not work against the overall accomplishment of the component’s business objectives. B. J

Also, the relative current importance or ranking of these objectives will provide guidance in selecting the number and type of performance measures to be included in the plan. A plan that is difficult to understand will lose a great deal of its motivation force, as well as be costly to administer properly.
For those who currently have a variable sales compensation plan(s) for their salespeople, a good starting point would be to consider the measures used in those plans. Although the measurements used for sales managers need not be identical, they should at least be compatible with those used to determine their salespeople’s commissions.
However, keep in mind that a performance measure that may not be