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Sergio Zuniga 09.20.2022 5 min read

How to choose the right type of sales compensation plan

An organization with an effective and perfectly drafted sales compensation plan has already taken a giant leap toward motivating professionals and boosting their productivity. Sales compensation plans should be tailored depending on the verticals and specific needs.

Companies must analyze their employees’ job responsibilities and unique skill sets before drafting a plan that resonates with them.

Understand your business objectives and drivers

The prerequisite to drafting an effective compensation plan is defining the objective. The objectives help analyze the progress and shortfall and suggest ways to align individual efforts with the overall goals. It is a multi-step process comprising:

  • Defining Business Objectives and Drivers
  • Defining Sales Goals and Targets
  • Defining Sales Quotas & Objectives

Clearly laid down objective helps team members align their efforts with the company’s goals. Objectives help team leads devise strategies to get the best out of the sales staff.

1. Consider what you want to reward and measure

Determine how much money, time, or other resources are needed to achieve results. For example, how much should a sales professional be rewarded for just initial lead generation? What kind of quotas should be set for sales staff who have attained their target with time to spare?

Figure out what specific behaviors you'd like to see from each employee to qualify for the compensation package (e.g., increased sales volume, seasonal adjustments, etc.). If they're achieving these goals while working under deadline pressure with limited resources, it should reflect in their paychecks too!

2. Explore your available compensation options

The commission-based plan is the most common incentive plan. It is a payout based on a percentage of sales. Besides motivating professionals to generate more sales, such an incentive package attracts top talent to your company.

Commission-based plans require you to set up an accurate system for tracking each employee's performance and ensuring they're earning their full potential compensation every month. It would be best if you defined how much time each employee should spend working on a new business versus existing clients; this will determine how much money they make.

3. Determine the pay structure that matters the most to them

When choosing a compensation plan, the most important thing is to understand your employees, their needs, and motivations.

It’s important to know what they are getting paid so that you can compare it against other plans. What you pay may be insufficient in the current industry or economic scenario. Such a situation may lead to the erosion of motivation and affect sales.

You can address the situation by asking current employees for their take on the existing compensation package and ways to improve it. It is a crucial step before moving forward with new initiatives like Sales Compensation Plans (SCP).


Use the right technology to implement your incentives

When choosing a sales compensation plan, it's vital to ensure that your company uses the right technology. Technology can help you achieve your goals, automate processes, measure performance, and reward employees. It also allows you to get the most out of your incentive programs by managing them from start to finish.

Using technology can also help better sales professionals' performance. Effective data analysis and sales enablement can give sales professionals better insights into deals and ways to close them. Technology like automation can help them focus on core tasks without worrying about manual aspects.

The right sales compensation plan can help you achieve goals expeditiously. Apart from the obvious advantage of increased return on investments, the right compensation plan can motivate your sales staff and foster cooperation and team spirit while upholding the company’s objectives.


Want to learn more about how to build high-performing sales teams, and refine your sales strategies and sales comp plans? Visit our blog to get the latest insights.