8 years ago
April 13, 2016

3 Ways To Tell If Your Sales Compensation Plan Is Competitive

Having a competitive sales compensation plan can attract top quality sales people and reduce time to hire.

Rhys Metler

sales compensation plan competitiveSales hiring is one of the most difficult tasks businesses face, but it is also one of the most important. Having a competitive sales compensation plan is an important aspect of sales hiring, since top quality sales people will rarely pursue openings that don’t offer a competitive sales compensation plan. If you are not sure whether your sales compensation plan is superior, here are three ways to benchmark it to the competition. 

Does Your Sales Compensation Plan Cull Non-Performers while Retaining ‘A’ Players?

A good sales compensation plan should reward top sales reps for their performance, but it is equally important to tailor the compensation plan so that non-performers are not rewarded for lack of results. The best sales compensation plans do three things:

  • Compensate ‘A’ sales reps for ‘A’-level results
  • Galvanize ‘B’ sales reps to improve
  • Encourage ‘C’ sales reps to pursue other employment opportunities

First and foremost, your organization should not have to pay non-performers when results are not forthcoming. Secondly, the best sales reps want to work with reps performing at similar levels, and tend to do better under a sales compensation plan where the competition is hot. Sales compensation plans that reward sales reps even when they do not perform to standard might look competitive at first glance, but these rewards have a demoralizing effect on the rest of the sales team, making your sales compensation plan less competitive in the long run.

Does Your Sales Compensation Plan Offer Multiple Compensation Incentives?

Sales compensation plans with high base salaries tend to attract the wrong type of sales candidates because these plans send the message that salary is not based on performance. Quality sales candidates expect pay to be based on results, and will seek sales compensation plans that reward results on various levels. A competitive compensation plan therefore should look outside the base salary and offer production driven earnings such as:

  • Short term sales promotion incentive funds (SPIFs)
  • Earnings based on a percentage of earned revenue, margin, or gross profit
  • Start of the quarter/year sales bonuses
  • Incentives for higher average selling prices

Is There a Cap on Your Sales Compensation Plan?

When filling pure sales roles where selling is the exclusive responsibility, a compensation cap can be the deathblow to recruiting top talent. Since top performers typically earn twice as much as target, those with a history of results are reluctant to work under a sales compensation plan that limits earnings.

At the same time, caps can make sense from a business standpoint; especially in the early stages, an organization might not have the resources to support unlimited earnings for even the best sales reps. Your task is to balance the sales compensation plan against business needs. This does not have to be a straight cap or no-cap proposition; there are several different types of caps, some of which may be more accepted by top talent in your industry: 

  • Absolute caps
  • Deceleration of earnings at certain compensation levels
  • Caps tied to overall organizational performance
  • Per deal caps

Also keep in mind that it is slightly more common to place earnings caps on roles that combine sales with other responsibilities, such as account managers or support specialists who spend just part of the workweek on sales.

An organization without a competitive sales compensation plan will find it difficult to fill sales jobs as sales reps follow the money to better compensation plans. Working with a sales recruiting agency can help you develop the right sales compensation plan for your business, ensuring that your sales hiring is affordable while still attracting top sales talent. Consider tapping into the expertise of a sales recruiting agency for outside advice on the competitiveness of your sales compensation plan to make sure that your plan is built to drive the results you need to meet your organization’s sales goals.

Rhys Metler

Rhys is a tenacious, top performing Senior Sales Recruiter with 15+ 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 daughters, BBQing on a hot summer day and tropical vacations.