8 years ago
April 13, 2016

Changing Your Sales Compensation Plan to Boost Your Sales

Changing your sales compensation plan to boost your sales can help your company get results.

Rhys Metler

If your sales compensation plan is improperly structured, it might not be able to boost sales the way that you would like to see. In fact, a poorly structured or outdated sales compensation plan may even work against your organization’s goals and your sales team’s best interests. These tips on changing your sales compensation plan to boost your sales can help your company identify the most effective methods to restructure a sales compensation plan for results.

Focus on Behavior by Aligning Sales Compensation with Targets

Good sales people are driven by results, and one of the results that these motivated individuals look for comes in the form of a paycheck. A sales compensation plan that places an emphasis on certain types of sales or selling behaviors is likely to drive sales people to prioritize the activities that lead to the largest remuneration. This can be beneficial for your organization, but only if the behaviors you most want to see are the ones that the sales compensation plan rewards.

  • Analyze your sales compensation plan and payouts against the activity of your sales people. Make sure that the activities your organization is encouraging are adequately rewarded.
  • If your organization has grown more reliant on recurring revenue sources, make sure that your sales people are compensated for recurring business.
  • Be cautious when placing higher values on short-term goals; this may come at the expense of long-term goals when sales people change selling behaviors. Short term selling activities are best rewarded through temporary incentives.

Consider Tiered Commission Structures to Reward Above Average Performance

Any sales person who routinely posts sales numbers above average expects to receive compensation in line with his or her ability and contribution to the organization. Many businesses have begun to realize that the old standard of “one commission fits all” is out of step with the expectations set by the marketplace. Instead, tiered commission structures that reward sales people for meeting clear goals are becoming standard for many industries. There are several ways that a tiered commission in your sales compensation plan can help boost sales:

  • Provide higher commission rates for sales that provide greater revenue after costs.
  • Consider bonuses and other incentives for sales numbers that exceed quota by a set amount.
  • Keep base salaries, if offered, consistent with industry standards while considering the value of the total compensation plan, using average sales as a baseline.
  • Institute a sliding scale of commission to encourage sales people to pursue larger sales and accretive sales through recurring business.

Rely on Education to Encourage High Value Selling Decisions

No matter how well written a sales compensation plan may be, a sales compensation plan cannot boost sales if sales people do not understand how or why compensation is structured. The final step to ensuring that your sales compensation plan performs is educating your sales force on all aspects of how their compensation is calculated and why the sales compensation plan is designed the way that it is.

  • When rolling out a new sales compensation plan, hold a sales team meeting to focus on educating sales people on the new features and benefits available.
  • Explain to your sales team that you expect a new or revised sales compensation plan to boost sales, and provide examples of where sales gains need to be made.
  • Give concrete examples based on average and top sales reps’ past sales and how compensation will be changed according to the new model to ensure understanding and buy-in.

Changing your organization’s sales compensation plan can be a major undertaking, but when the goal is to boost sales the potential rewards in increased sales and market share should not be underestimated. If you have tried other methods to boost sales and results have fallen short, look to your sales compensation plan next for ways to encourage meaningful change in your sales department.

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.