Quick Quiz: Compensation Plan Best Practices

How does your team’s sales compensation plan stack up? Take our quick True or False quiz to test your knowledge


1. Sales people perform exactly as they are paid to perform.

2. Its OK to have a complicated compensation plan.

3. Introduce the new compensation plan part way through the first month of the New Year.


True: Your sales team will behave exactly according to how the plan best rewards them, concentrating their efforts on what pays the most. If you have a specific objective (e.g. new customers, more repeat sales, higher levels of customer service), then you must reward the behaviors that pursue those goals. When revising your current incentive plan start by defining the desired objectives first, and then match the reward to having those objectives met.

False: The more complex the compensation plan, the easier it is to misunderstand or manipulate. For example, if your salespeople are assigned to geographic territories, be sure to develop and communicate clear guidelines on how they can sell to accounts that cut across territories, and how they’ll be rewarded for those sales. Make sure everybody knows and understands the rules. Sales professionals that don’t understand their compensation assume (sometimes unfairly) that it’s working against their best interests. This creates resentment.

False: Managers need to provide their teams a heads up on how they will be compensated the next year to allow for planning and pipeline development. Introduce the plan a couple of weeks before you are scheduled to implement it, giving your team a few days to digest its contents. Then hold a group meeting to discuss it. Meet with each salesperson privately to reinforce the plan and address questions and concerns that weren’t raised before the group. Ask your people about the plan to check for understanding.


Make sure you understand the plan and all its rules yourself. Review and edit the plan with your sales manager, and bring a non-sales manager into the discussion for a different point of view. Together, you should anticipate the questions your team will have and prepare solid answers. Remember: your salespeople will check whether their potential compensation might decline under the new plan. If that’s the case, be prepared to defend the changes.