Align Your Incentives to Focus on Profit

By: Frank F. Bilstein and Frank Luby and Hermann Simon

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Synopsis: A common corporate shortcut is to reward salespeople primarily on how much they sell or how much revenue they bring in. This shortcut often encourages behavior that can destroy your profits or undermine your efforts to increase them. It trains salespeople to ask their superiors for lower prices instead of negotiating with customers for higher ones. To retrieve the higher profits they deserve, companies need to make the transition from volume-based sales incentive systems to profit-based ones. This applies to your own sales representatives and to your channel partners, who act as your agents to the end customer.