Factsheet; Errors To Avoid When Designing A Sales Compensation Plan

The design process of a sales incentives and reward program includes a mixture of terms, conditions and rules that apply. I would argue that the process is very specific and its steps shall be followed and thought through carefully. If the process is followed, the chances are that these common mistakes will be avoided.

Look below for some of the most common ones that are commonly seen in the market. Those are key ones to avoid when implementing a system.

Quota Distribution And How It Affects Sales Compensation Programs

An essential part of each sales compensation plan is the territory allocation analysed in this white paper https://comp4sales.com/product/white-paper-territory-allocation-and-the-link-to-sales-incentives-programs/, and the quota distribution.

We have published a new paper https://comp4sales.com/product/white-paper-quota-distribution-and-how-it-affects-sales-compensation-programs/, deep diving into the idea of setting targets to the sales force.

Just having the greatest terms and condition in a program does not complete it without considering the revenues a territory can bring and its potential. An additional factor to consider is the capabilities of the sales person responsible for the region.

Below the introduction of our new white paper:

“Every time the end of the financial year rolls around, budget discussions become commonplace. The sales for the current year are almost done, and sales people are in a hurry to close opportunities in their pipeline. Everyone expects to have bigger targets for the next year.

Targets (interchangeably called quotas) are the standard by which sales people are appraised. How much of the target a sales person achieves is part of any appraisal, and knowing targets gives sales people a clear idea of how much money they can reasonably expect to make.”

Factsheet; High Turnover Of Sales People And The Sales Compensation Plan

Are your sales people leaving the job after a change in the motivation plan? Do they show signs of being demotivated?

The Sales Compensation Plan in place is evidently one of the main reasons sales people change jobs. It is also quite common that many organisations do not face the fact.

It is not just because the commission rates have been reduced that annoyed sales people. There are many other factors that lead to dissatisfaction. See below our factsheet with some key reasons associated with the compensation program that cause high turnover.

Start by assessing your program; watch and study data associated to performance and payout. Then you will find the individual aspects of the system to fix.

Factors To Consider When Deciding The Pay Mix

When designing a sales compensation program one of the first to decide is the Total Target Cash Compensation for a sales role. That means how much a sales person will get compensated in a year for reaching her quota.

The target cash compensation is split into two parts; the fixed salary and the variable part. A critical question is how much one shall give to the fixed and how much to the variable part? The pay mix, as it is usually called, can be 50/50, 60/40 or any other split one decides to have.

Which are the factors to consider for a larger fixed or a larger variable part?

Use the below infograph to help you understand more this notion.