An effective sales compensation plan will incentivise sales professionals to reach their goals by outlining their earning potential during the deals they close.
Compensate your teams fairly. Pay top performers more while ensuring poor performers don't find ways to manipulate the system and offer competitive pay.
Also, consider the financial wellness of your organisation. Incentive compensation management requires planning. Let's discuss some ways to develop your compensation plan for your sales professionals but first, consider a few questions that will help you create your plan.
A sales compensation plan is an essential factor in motivating your sales teams. Design one that aligns with your organisation's values and industry standards (we recommend adding a few perks your competitors aren't.)
When developing your plan, consider what will help you keep your top talent happy and motivate those still learning to improve their skills. Here are some questions to consider when developing your compensation plan:
Nearly 61% of sales professionals feel underappreciated. In a survey published by Pipe Drive, sales reps also stated that around 42% of companies they have worked for did not create a clear career path for them to advance.
Source: Sales Xceleration
With labour shortages plaguing companies across every industry, you can no longer take the value sales reps bring to your organisation for granted.
Creating effective sales compensation plans is essential to your sales professional engagement strategy. That can mean the difference between superior retention and high attrition of talent. Here are some key strategies for building an effective compensation plan:
Developing or updating a sales compensation plan should include getting input and support organisation-wide, especially those at the highest levels. Form a sales compensation design team that involves C-suite executives and representatives from the sales, human resources and finance teams. They can provide insight into how the organisation's plan aligns with goals and the impact of the sales professionals on business success.
Typically, sales compensation plans only benefit one party--the organisation. A sales compensation plan should be a win-win for both the company and the sales reps who work for them.
To do this, you will need a well-crafted plan with compensation tied to no less than two of the following three key factors:
If your plan ties the salesperson's compensation solely to performance, the business could perform poorly, but the sales professional will still get paid well. In addition, if your organisation achieves its sales target, each sales professional will profit from achieving the company's overall goal.
Most companies typically specify which portion of employee compensation relates to the impact they can have on departmental and business sales objectives. Imagine an environment where every sales team member has concerns for common goals.
Companies offer various types of compensation plans. Design the plan that works best for your organisation. It should be easy to understand, have achievable elements and fit each sales position whenever possible. If your teams have to work too hard to hit a quota and get a commission, you should expect high turnover and low morale.
That old acronym K.I.S.S.--keep it simple, silly--applies to effective sales compensation plans. They must be easy for your management teams to implement and for your sales teams to understand. If your compensation plan involves a lot of tracking (especially if they have to do it manually), sales teams may spend more time figuring out their compensation than earning it.
Reward top performers with extra compensation. You can offer additional incentives if they achieve 100% of their sales quotas along with all plan requirements. We have outlined the reasons why:
Source: Incentive Compensation Management Software - Vena
Get a central database, Excel templates and workflow automation with Vena's Incentive Compensation Management (ICM) solution all on one platform. Benefit from efficient and transparent sales compensation plans and improve payment accuracy, visibility and sales performance.
Manage your entire compensation process, automate compensation calculations and spend less time auditing. Use the insights from our ICM solution to develop your sales compensation plan.