Linking Petrol Allowance to Sales Targets: Is This a Practical Approach?

Hi,

Is it practical to link petrol conveyance (fixed amount) to sales targets? For example, if the person's average conveyance is 1000/- and his target is 1 lac, based on the target achievement, conveyance would be reimbursed, allowing the company to link the same to minimum sales.

I do not think it is prudent to link the conveyance amount to the sales target achieved when such an amount is paid on the basis of reimbursement of expenses incurred by the sales personnel. It is not necessary that every contact or visit to the clients, present or prospective, made by the field sales employee may convert into sales, either new or additional. Nevertheless, he undertakes the travel and invests his time and skills in meeting and influencing their decision for sale. Conveyance reimbursement cannot be equated with an incentive that can be linked to sales targets.

Regards,
B. Saikumar
HR & Labour Law Consultant
Navi Mumbai

Dear Sankush, Your challenge is different, and the solution you would like to adopt is different. Your main challenge is the low strike ratio of the sales calls. The strike ratio is calculated as (Number of Sales Conversion * 100 / Total Sales Calls made). If you want to increase the strike ratio, then you need to train your salespersons properly.

Sales Training Considerations

As far as sales training is concerned, let me ask you a few questions:

a) What is your product or service?

b) Who are your customers? How have you categorized your customers?

c) Is there absolute uniformity among salespersons regarding the handling of the sales call? If given a chance for a dozen salespersons to handle a particular sales call, will they handle it exactly the same way, or will there be variation?

d) This question is based on (c) above. Sales productivity depends on the customized sales process that the salespersons implement. Do you have a well-researched, well-documented sales process? If yes, then how do you measure the process compliance?

e) To improve sales productivity, have you generated knowledge assets as to why customers buy and why customers do not buy, as well as why sales calls fail and why sales calls succeed?

f) Lastly, what is the total sales expenditure? Of this, what percent is petrol allowance?

Putting a cap on petrol allowance is a poor way of controlling sales expenses. What you need to do is train your salesperson and improve the sales productivity. Rather than saving on tidbits, think of selling lavishly and earning lavishly!

Thanks,

Dinesh Divekar

Understanding the Query

Can you mention the reason(s) for this query? Dinesh Divekar has hit the spot—'Your main challenge is the low strike ratio of the sales calls.'

Like Saikumar and Nathrao mentioned, relating/linking sales targets to conveyance allowance is not just 'not right' but also counter-productive. You are giving scope for new problems that you could find tougher to handle, including possibly revolt by the sales team, in the worst-case scenario.

Steps to Address the Situation

First and foremost, sit with the Sales Head and figure out the probable causes for this situation. Also, sit with the Sales team without the Sales Head's presence (this gives you the actual ground realities without any fear from the team).

Then collate the inputs you received and discuss with the Company/Division Head/CEO/MD. Only then can you begin to think of solutions.

While I know I am making assumptions here, my guess is that it's a very accurate assumption. If some work had gone into finding the causes for this situation, the 'relating/linking sales targets to conveyance allowance' wouldn't even have been considered as a possible solution at all.

Potential Causes

While one definite reason could be what Dinesh Divekar mentioned—poor/improper training—the other reasons could also be poor targeting of prospects, low motivation of the sales team (for whatever reasons), poor management style of the Sales Head, unreasonable sales targets, lopsided hiring of the sales team, etc. These are just possibilities. The real reason(s) is for you to figure out, and please be mentally prepared to discover that there could be multiple reasons.

If you have already done some groundwork, then it's better to mention the details here so that the members of this forum don't have to keep guessing each and every possibility.

And yes, please confirm the sector your company is in. Factors/reasons can vary widely between sectors.

Regards,
TS

You can fix the target of sales, but you cannot link it with the limit of petrol. If you link both together, that would be quite an unwise and unproductive decision on your part. Nobody would like to pay the petrol cost from their own pocket just to increase the sale of the company's products. You can't avoid employee attrition in that case. Recruitment costs can go much higher, besides affecting the productivity of the company due to frequently recruiting fresh hands if the employees start leaving the company due to such an unwise decision.