Sales Compensation Blog

An effective sales compensation plan is critical in motivating the sales team. It provides focus and rewards for the right results.  To make sure that your plans help speed your team towards success, avoid these typical sales compensation plan roadblocks:

Plans that are too complicated: These plans cause reps to either waste valuable time trying to figure them out or, even worse, to ignore the plan altogether and do whatever they think is right.

Too many measures: A measure includes quotas, goals and any other expectation of attainment for the sales rep. If you have more than five measures, the plan loses critical focus. In my experience, you should have 3 or fewer measures to avoid distraction, frustration and confusion.

Unrealistic quotas: You want to have at least half of the reps making quota. Otherwise, the reps won't be able to see themselves as achievers and will quickly become unmotivated.

Financial rewards delivered too late to be associated with the event: It's human nature - when we are rewarded right away for a behavior, the motivation to repeat the behavior is strong. The more you wait to pay incentives to your sales rep, the more the reward loses its power to motivate.

It is critical that you align sales plans with corporate strategy.  That's easier said than done, but following these four steps will get you thinking in the right direction.

First, the organization needs to agree on the corporate strategy that will be delivered though sales.  Is the goal to increase revenue, further penetrate the market, increase profitability, improve retention, sell long term contracts?

Some of these goals are mutually exclusive and, unfortunately, you can't have it all.  You need to ensure that the strategy doesn't compete with itself. Also, look at the number of goals.  If you try to focus on too many of them, they get diluted and the company will not achieve any of its objectives.

Next, see if the corporate strategy differs from last year's.  If the strategy will remain unchanged, did the sales plan deliver the desired results in the previous year?  If it didn't, search for the disconnect and adjust your sales plan.  Analyzing your team's performance distribution may point to the source of your problem.  ( See our post on "Building A Performance Distribution Curve On Your Sales Team". )

Once the corporate and sales strategies are defined, determine how the various job roles support the strategy.  Defining job roles goes beyond a focus on revenue numbers.  A change in strategy may lead to adding job roles to focus on developing channel partner relationships or separating new sales from renewal sales.

Lastly, look at measures within the roles. Measures are things a rep carries a quota or goal for. It is imperative that these measures align to the sales strategy.  With its visual approach, Makana's alignment view helps the plan designer ensure that the measurements support the corporate strategy and that the plans are aligned along job roles.