Sales Compensation Best Practices

Countless commission structures fail despite the best intentions of sales leaders. Many plans are too complicated to be properly understood or effectively implemented. More fail when sales managers don’t explain their plans properly. The result: everyone comes up with their own interpretation of the rules, and forms a unique opinion of which customers and commissions they share. Before you know it, inside sales is battling with field sales, direct reps are at the throats of the channel team, and you’re caught in the middle of the fray. Selling time is wasted, morale plummets and salespeople start to resign. That’s no way to grow a company.

In 20 years of selling, I’ve never encountered a compensation plan that eliminated all conflicts. But with careful design and reinforcement of cooperative relationships, you can have a commission plan that works. Here are things to consider:

1. Keep your plan simple. 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.

2. 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.

3. Make sure everybody knows and understands the rules. Introduce the plan a couple of weeks before you plan 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.

4. Encourage team building to ward off conflict before it starts. Have competing reps (for instance, inside and outside sales) meet to establish relationships and build trust. The most successful teams always engage with their selling partners.

Bring teams together to discuss potentially problematic accounts. I have seen some plans that actually required an agreement in writing of how customers can be approached, by whom, and how the commission will be split.

One more thing: 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. Lucky for you, you have no choice.

Dedicated to increasing your sales,

3 responses to “Sales Compensation Best Practices

  1. Hello there, simply turned into aware of your blog thru Google, and found that it is really informative. I’m gonna watch out for brussels. I will appreciate if you continue this in future. A lot of other folks will be benefited from your writing. Cheers!

  2. Someone necessarily assist to make significantly posts I’d state. This is the first time I frequented your web page and so far? I surprised with the research you made to create this actual put up incredible. Magnificent process!

  3. I have read so many articles or reviews on the topic of the blogger lovers but this piece of writing is actually a pleasant article, keep it up.

Comments are closed.