8 years ago
April 25, 2016

Why It Might Be Time to Reevaluate Your Sales Compensation Plan

There are many reasons to reevaluate your sales compensation plan. If any of the below reasons resonate with you, then it’s time to reassess.

Rhys Metler

The importance of your sales compensation plan cannot be understated. Sales compensation is a big deal for many reasons—it’s strongly linked to motivation, it can speed up your sales, it can promote your company goals, it can provide stability, and it can help your sales managers with job coaching, among other things.

Knowing its importance, you might have spent a lot of time, resources, and energy on your current sales compensation plan. But since then, you might not have given it another thought.

Reevaluating your sales compensation plan should be a priority—after all, it does drive your sales team’s performance. And if you want performance to improve or at least be maintained, reevaluation might be necessary.

Here are some reasons why it might be time to dust off your sales compensation plan and reassess it.

Your Sales Strategy Has Evolved

What you sell, how you sell it, and who you sell it to might have changed over the years, especially if your company has grown significantly since you first created your compensation plan. The ways in which you connect with customers might have changed—even the types of customers might have changed, or the types of products or services you sell might have grown over the years.

For example, when you built your startup, you were totally focused on customer acquisition in order to build your customer base—and just about any customer was a great customer to target. But as you grew, you might have started to focus more on upselling or cross-selling to existing customers or started to focus on very specific buyer personas—and your sales compensation plan might not reflect that. When your strategic vision changes, so must your compensation plan—it must evolve with your company.

Switching from General to Specialized Roles

As a smaller company, you might have had only a few sales reps who did it all and wore many hats. But evidence suggests that specialized sales people are more effective than generalized ones. And to increase sales, you changed their roles. But when you did so, you might not have realized what effect this might have had on your compensation structure. The reps that now focus solely on inbound qualification and account management don’t have any more room to actually close deals—that’s left to the closers. Your commission structure should be adjusted to reflect these role changes.

Changes in Current Market Conditions

Your competitors grew. New products or solutions just like yours have been introduced into the market. Inflation, interest rates, or exchange rates might change the way you sell or compensate. As such, the attainability of your currently assigned quotas might no longer be realistic. Or the compensation you offer might not be enough anymore to drive revenue and motivate. Or, it might be too high and really hurt your profits. Either way, your sales compensation plan needs to change with current market conditions.

Dropping like Flies

Sales has a high turnover rate, there’s no doubt about that. Sales people leave due to lack of advancement or opportunity and myriad other reasons. But if your sales compensation plan isn’t effective anymore and isn’t meeting your sales reps’ financial needs, you’ll have trouble retaining top talent. If your sales reps are dropping out at an increasing rate, you need to reevaluate your compensation plan ASAP.

Mediocre and Poor New Hires

Hiring sales people is difficult. Often, you won’t get any good candidates applying to your open positions. Though this could be because of your job description, your reputation, or other reasons, it might also be because your compensation plan is no longer effective. It doesn’t compel top talent to come work for you. The demand for qualified sales talent might be fiercer, in which case you’ll need to reassess and increase base pay, incentives, or commission, or all of the above.

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.