3 years ago
July 11, 2014

Designing a Sales Compensation Plan (Part 1)

Salespeople are your company’s frontline champions and advocates for the products and services you sell. They are the connection between the company

Rhys Metler

Sales CompensationSalespeople are your company’s frontline champions and advocates for the products and services you sell. They are the connection between the company and its customers, the driving force of top line revenue and the main contributors to the growth of your company. And more than any other segment of your workforce, your sales team directly influences how the marketplace perceives the company and values its products.

To realize the maximum value of your sales team, it is critical you have a solid sales compensation program in place. A well designed compensation plan will:

  • Attract and retain top sales people

  • Align employee interests with the company’s business objectives

  • Ensure compensation is results driven & market competitive

Well designed sales compensation plans will accomplish many things such as motivate your sales team to increase sales, reward them for strong results and retain top performers. However, there is one important aspect of sales compensation design that is often overlooked: sales compensation plans should clearly communicate the focus of each sales job. Once a member of the sales team develops an understanding of the sales compensation plan, they should have full understanding of what activities they should be focusing on. In fact, if done well, a sales compensation plan should replace the traditional job description for sales jobs.

Sales people will naturally spend more time and energy on the activities that will earn them more money – so it’s important that companies clearly define what their business objectives are make sure their sales compensation communicates those objectives to their sales team. For example, if an organization wants to focus its sales team on developing new business, the sales compensation plan should be designed to pay out more commission for acquiring new accounts than for renewals. Sales people are driven by money, so when compensation is attached to certain activities and results it adds weight and gets their attention.

It’s also important to customize the sales compensation plan for each job. By doing so, the company can clearly communicate the key activities and deliverables for each sales job. The commission for an account executive role focusing on “hunting” should be more heavily weighted on closing new business. And in comparison, the commission for an account management role should be more heavily weighted on customer retention and renewal measures.

Look for Part 2 of this series tomorrow, where I’ll dive deeper into sales compensation plan design.

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Rhys Metler

Rhys is a tenacious, top performing Senior Sales Recruiter with 11+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and two daughters, BBQing on a hot summer day, tropical vacations and cottaging.