Tag: Sales Compensation Plan – Design

Deciding who gets paid for closing a sale is surprisingly difficult. I’ve seen it time and time again in the sales environments I’ve worked in. One person helps close a deal, but because it wasn’t “their” sale they get no credit or commission, and before long they’re disgruntled enough to leave the company.

Deciding who from among the sales team is eligible for sales credit is a complex but vital part of sales incentive design. If your team members don’t feel they’re being fairly compensated for their involvement, resentment will build and performances will drop.

Who Made The Sale? It Might Not Be As Straightforward As You Think

Anyone who hasn’t worked in a sales environment thinks it’s straightforward: You make the sale, you get paid commission. Of course those of us who work in sales know it’s not quite that easy.

While it’s true that each sales department has a team with quotas and targets to work to, that’s not the whole story. They say it takes a village to raise a child. Well, sometimes it takes a team to make a sale.

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For many organizations and their sales managers, the Sales Compensation plan is seen as an important tool, if not the only tool, necessary to motivate your sales team, so you may not wish to read the rest of this article to discover “Fve reasons why sales incentives cannot replace sales management”. On the other hand…

The Sales Compensation plancan create excitement, bonding and in-house friendly camaraderie, developing further incentives and encouragement to lead your sales team to achieve profitable outcomes for all concerned.

If your organization is using a Sales Compensation plan to manipulate sales people, you’ll already see how it can drive and lead your sales team to certain directions and behaviours, some that may be beneficial, others that can be totally devastating and disastrous.

So how succesful is a Sales Compensation plan in managing your sales team?

Since, in the business world, success is judged by money, such as share and stock values, capital assets and profit, a Sales Compensation plan translates this notion of money as being a driving force for the success of your sales team, and even the dream of a fast car, huge house and luxurious yacht.

You may also consider annual bonuses as incentives for your sales team, bringing excitement, and perhaps some friendly in-house rivalry, believing that the focus for the sales team is how much their bank balance will increase each month.

On that basis, a typical sales manager may offer extra money to the sales people to perform a certain task, most likely believing they will chase those illusive additional sales, keeping the company happy by performing this new task, and being appropriately rewarded.

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If you have a team of salespeople out there landing customers or clients for your products and services, then you most likely have a sales compensation plan already in place. Even something like an end of year bonus counts as a sales motivation plan – after all, you don’t give bonuses for no reason.

There are many different ways to design and implement a sales compensation scheme. Some are as simple as a yearly bonus. Other schemes are highly complex and need a team of people to administer them smoothly.

Sales Schemes Can Vary Widely

Many sales motivation schemes are based on earning commission. Within the  field of commission-based sales schemes there are multiple variations in how they work, and how much they pay.

Take for example a sales person who makes $100k each year. If their company offers a 50/50 split between a fixed salary and incentive-based earning, that sales person will get $50k fixed salary, and the other $50k only if their targets and objectives are met. If that same person works for an organization with a 70/30 split, they will get $70k in fixed earnings, with the other $30k dependent on performance.

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