Is your sales compensation strategy up to the task of keeping your sales team focused, motivated, producing, and engaged? Are you winning all the business you want, or are your pay practices holding you back? What challenges do you face in your current sales compensation plan design? Perhaps your incentive compensation is incentivizing the wrong activities or your salespeople are not clear on how their day-to-day activities will impact the bottom line?

Sales Compensation Plan Design Challenges

What sales compensation plan design challenges do you face? What are the most common sales compensation design issues? Here are a few to consider:

• Rewarding performance: differentiating peak performers from the average. Companies struggle with this, especially when you have continually changing objectives.
• Creating clarity: simplifying the plans to improve line-of-sight. "With so many competing objectives, so many different goals, compensation plans are becoming very complex today. Simplifying the plan and keeping a clear line-of-sight – allowing a person to understand how they’re getting paid when walking out of a customer site – is key. They can’t be too complex." Joseph DiMisa explained during a recent BLR webinar.
• Contests or special incentives: striking the balance between the pay program and supplemental incentives. How do you strike this balance? This has become more difficult recently as salespeople have not been meeting targets – causing companies to put more money into supplemental incentives instead.
• Managing costs: controlling the cost of sales under various performance scenarios. How do you assess and manage the cost of sales – both in total and in terms of the fixed and variable components?
• Alignment: ensuring that the compensation plans meet the business objectives. How do you ensure yo’re doing this in a consistent manner?
• Quotas: implementing a market-based approach to setting and allocating quotas. Companies need to ask whether quotas or commission should be used. How do you strike the balance between market opportunity and what the organization can support? How do you set the right target?
• Measuring profit: why is the sales organization making money when the company isn’t? "How do we ensure that we’re paying our people properly and we’re making money and there’s harmony? We don’t want to overpay people when the company is losing money." DiMisa advised.
• Systems and administration: tracking and managing how the sales compensation plan will work.

How many of these sales compensation design challenges do you face? How do you handle them? For more information on addressing sales compensation design challenges, order the webinar recording of "Sales Compensation: Energize Your Sales Team, Boost Performance, and Stay on Budget." To register for a future webinar, visit http://catalog.blr.com/audio.

Joseph DiMisa runs the sales effectiveness practice for Sibson Consulting, where his areas of expertise include working with companies to develop and implement direct and indirect compensation plans, sales strategies, and sales effectiveness programs. He has more than 20 years of experience working with telecommunications service providers, computer and communications equipment providers, software, and manufacturing companies.