Complicated compensation plans that are poorly designed and communicated can confuse and demotivate your sales team. Here are a few questions that may help you determine if it might be time for a program redesign.
Is your sales compensation plan too complicated?
Do your performance measures align with job content and company goals?
Is your sales plan producing the desired results?
Do your participants understand the program?
A well-designed sales compensation plan will motivate your team, drive strategy, and grow revenue and profitability. Simplicity in sales compensation plan design is key to shaping behavior and tracking performance. If payment is made contingent upon performance, then employee motivation to achieve high performance is increased. Here are steps to help guide you thru the process:
10 Steps to Design a World–Class Sales Compensation Plan:
- Pay Philosophy: Define your overall pay philosophy and objectives for sales compensation. Determine the best approach for your organization by understanding which of those are critical to your organization’s success.
- Key Metrics: Determine which key metrics should be used to monitor and track success.
- Job Roles: Review sales roles and responsibilities, identify relationships between marketing, sales, and client services. Who will participate?
- Target Total Cash Compensation: Review and model your pay mix and upside potential to determine base salary plus sales compensation target.
- Quota Setting & Allocation: Establish quotas based on pre-determined objectives and the organization’s financial objectives.
- Performance Measures & Weighting: Establish performance measures by role. Ensure performance measures align with job responsibilities, use results-based measures, and ensure performance measures are aligned with company objectives.
- Payout Formulas, Timing & Frequency: Determine how the plan’s results will be monitored and administered. When will participants be paid? How often and how soon?
- SPIFs: Special Program Incentive Funds can be used as an additional incentive to drive specific behaviors.
- Special Issues & Terms: As an organization, determine how you will handle special issues and circumstances that may arise and communicate them clearly: territory changes, claw backs, draws, etc.
- Training and Communication: To gain and retain sales managers’ support, it is critical to involve them early in the process and to provide training and clear, ongoing communication as you implement a new plan. Communicating expectations, encouraging a culture of accountability, and defining clear goals that are set at a challenging but attainable level are the cornerstones of a great program.
How can we help?
Let us help you redesign your sales program for optimal results. A well-designed sales compensation program motivates participants and drives the desired business results.
Compensation Works partners with you to design customized sales compensation plans that are aligned with your organization’s strategy, goals, and culture. Our experts help clarify business objectives, evaluate the effectiveness of your current program, and design a program that aligns with business objectives and improves accountability.