Yes, you read that right! We’re talking about rebuilding your sales compensation plan because
- the one you have might not be right for your business now (even if it was a few years ago), and
- in the current fight for top sales talent, it’s good to re-envision how you can ensure significant benefits for your sales reps to keep them onboard and happy in your organization.
So, let’s dive in. Why will this work, what are the benefits, and which tasks do you need to do to manage it effectively?
Why Reconsider Your Sales Compensation Plan?
Firstly, it’s a powerful motivator! And by that, we mean for everyone if you cater to different groups – it’s pointless pretending you only have a team of stars. You don’t. You have what Harvard once called “core performers,” plus others who are “laggards” or “rainmakers!”
You’ll have a standard comp plan, but don’t miss a great opportunity for some flexibility for both individuals (where appropriate, fair, and in alignment with your HR policies, of course) and teams.
Secondly, if you find a way to incentivize them all, they’ll not only start meeting their targets but exceeding them – and this ultimately contributes to your business’s growth and profitability.
So let’s consider the principles that should contribute to your plan and see why rebuilding a robust sales compensation plan is in everyone’s interests.
Three Principles for a Strong Sales Compensation Plan
1 Fairness
This is crucial in ensuring that your sales representatives feel valued and recognized for their efforts. They should be able to see a direct correlation between their performance and the rewards they receive.
If you establish transparent and objective performance metrics, you can create a level playing field, allowing every salesperson to understand how they can maximize their earnings based on their individual contributions.
2 Alignment
Alignment is another critical aspect of your sales compensation plan. You must align your sales goals with the overall objectives of the company.
This means tying incentives not only to revenue targets but also to
- strategic initiatives,
- customer satisfaction, and
- long-term business growth.
By doing so, you encourage your sales team to think beyond short-term gains and cultivate relationships that lead to sustainable success. This is a priority for your business success – which affects your reps too in a virtuous circle!
3 Flexibility
This is key, as we indicated above, in acknowledging the evolving nature of your business and the diverse needs of your sales force.
So – you should have a standard comp plan, but one that has some inbuilt flexibility to offer a range of compensation structures, such as
- a mix of base salary,
- commissions,
- bonuses, and
- performance-based rewards.
In this way, you can cater to different skill sets and motivations within your team. Flexibility empowers your reps with a sense of ownership and personal investment in their success.
If this makes sense as a sound chassis on which to place your sales engine, let’s look at the benefits your reps will immediately perceive.
Positive Outcomes From a Re-envisioned Sales Compensation Plan
Have you ever felt you should have got something more for the effort you put in? That’s where fairness plays out. The benefit to your reps, however, is wider than a feeling of fairness.
They will discover your sales compensation plan enhances their earning potential, providing rewards they can see are a good fit with their performance (you will have analytics tracking this to discuss with them!).
And not only enhanced earning potential but job satisfaction – this is one of the key ways you retain staff today.
Satisfaction with coming into work and enjoying their job boosts their and the team’s morale and helps foster the positive and motivated sales culture you’ve been wanting to create.
And in addition to retaining your good reps, your newly envisioned sales compensation plan will attract new talent. If your plan positions you as an employer of choice in your sector – with a competitive package and performance-based incentives – you’ll not only attract new talent but reduce staff churn as they see opportunities for skills growth and advancing their careers within your business. Why would they want to move on?
However – before we look at the “how” of rebuilding a robust sales compensation plan – another benefit is this: Your team rewards will encourage collaboration and team work.
As a sales manager, this must be your aim because, as we mentioned above, you have a team of mixed ability. Introducing a way of growing everyone’s skills by allowing those with specific ones in some areas to help those who lack them, and vice-versa, works for everyone’s achievements.
Your sales representatives will work together to achieve shared goals. This synergy can lead to increased productivity, knowledge sharing, and overall stronger performance as a team.
If you’d like help to reorganize your sales compensation plan, at 360 Consulting this is something we specialize in. We’re happy to talk and help.
Otherwise, let’s look at the list of tasks you need to accomplish in order to restructure this sales compensation plan.
12 Tasks For Rebuilding Your Sales Compensation Plan
1 Conduct an in-depth analysis of your current sales performance and compensation structure.
2 Research industry best practices and benchmarks for sales compensation plans.
3 Identify key performance metrics that align with your business objectives.
4 Define the compensation structure, including the mix of base salary, commissions, bonuses, and other incentives.
5 Determine the threshold levels and targets for each performance metric.
6 Develop a clear and transparent calculation methodology for sales commissions and bonuses.
7 Create a communication plan to effectively explain the new sales compensation plan to your sales team.
8 Consult with HR and legal teams to ensure compliance with labor laws and regulations.
9 Design a performance tracking and reporting system to monitor individual and team performance.
10 Set up regular performance review meetings with your sales reps to provide feedback and address any concerns.
11 Establish a recognition and rewards program to acknowledge exceptional performance.
12 Evaluate and adjust the sales compensation plan periodically (again!) based on performance outcomes and market dynamics.
360 Consulting Can Help You Build a Great Sales Compensation Plan
Why not strengthen your sales with systems and strategies that work for your reps’ compensation? Our 360 Sales Engine helps you achieve measurable and repeatable success.
We’d love to support you. Schedule a free consultation today and let’s talk!