The Sales Compensation Plans Cannot Do It Alone

by Ellen Miller

Download this article:
The Sales Compensation Plans Cannot Do It Alone› (PDF, 68KB)

Sales compensation plans cannot stand alone in driving results. Time and money spent on constructing well-designed plans is time and money wasted unless the plans are aligned with the business initiatives, go-to-market strategy and organizational structure. In addition, the plans must be well-communicated by the management, understood by the sales force, and the business practices surrounding the plans should be sound. Over and above the base-incentive mix, upside accelerators, and plan measures, the following are factors that should be considered in ensuring the successful implementation of your plans.

1. Quota-Setting Ability
   If a company has quota-based plans, setting challenging yet achievable quotas is the single most important component of any sales compensation plan. No matter the size, complexity or age of a company, most struggle with setting quotas, especially down to the account or territory level. Time spent on defining and implementing this process, in a partnership between the sales leadership and sales finance, is critical in achieving the desired business initiatives.
   
   
2. Accurate Crediting
   There should be sufficient systems in place to accurately credit the sales agent(s) and provide enough visibility into deal transactions such that the sales person is not spending hours trying to figure out which deals they have been credited for and which are still pending.
   
   
3. Correct and Timely Payouts
   Whether commissions and/or bonuses are paid monthly or quarterly, these should be paid on time and should accurately reflect the effort of the sales person. As with crediting above, the last thing that a sales organization needs is to have a sales person maintaining their own spreadsheets to determine whether payouts are accurate. For high risk plans in particular, these payouts should be timely to maintain the sales force focus and motivation, not to mention maintain the sales agent’s cash flow.
   
   
4. Plan Roll Out
   Prior to the plans being announced to the sales force, each sales manager and sales finance, commissions, operations and human resources staff should be trained in the objectives and content of the sales compensation plans. Then individual sales managers should communicate with their sales employees to explain the components of the sales plans and their quota for the next fiscal year. Supplemental communication vehicles, such as web sites and educational meetings providing plan summaries, payout examples and Q and A’s are invaluable in providing a complete picture of the plans and their objectives.

Please feel free to contact Ellen at (831) 475-5722 or by email to discuss any of your sales or incentive plan challenges.

Serving clients in San Jose, Silicon Valley, San Francisco Bay Area & Nationwide