7 Most Overlooked Factors for Designing a Sales Compensation Plan

Building out your sales compensation plan for 2014? Before you wrap things up, make sure you haven’t forgotten to factor in these seven important tips.

This is the second post in a two-part series on developing the right sales compensation plan for you. In Part I, we focused on the “Building Blocks of an Effective Sales Compensation Plan“. In this post, we’ll highlight the seven most common factors sales managers tend to overlook.

7 Most Overlooked Factors for Designing a Sales Compensation Plan

1) A simple plan is better than a thorough plan

Avoid mapping out all intricacies of the compensation plan in order to avoid confusion. Stick to the basics — if a rep can’t calculate their expected commission at any given point, the plan is not effectively motivating behavior.

2) Set comp metrics that align with your business model and stage of growth

While this may seem like a no-brainer, it can be challenging. No company is alike, so be sure to build out compensation plans based on the type of organization you are and where you are in your stage of growth. Incentivize for your organizational goals. Operating at the expansion stage? Incentivize for market share and new customers rather than cash flow.

3) Design your comp plan document like a marketing asset, not a contract

The purpose of a compensation package is to inspire and motivate your team. Rather than intimidating them with a verbose contract, use this as an opportunity to incorporate your communication strategy.

4) Ensure you can accurately track your quota metrics

Be sure to establish a process for tracking metrics prior to rolling out your compensation plan. Also make sure you are avoiding metrics that are subjective, estimated, and incomplete! Reps spend 5-10% of their time fixing their comp plan, and organizations can avoid that by compensating on quality metrics.

5) Provide real-time visibility

Provide a live dashboard indicating attainment to quota so that reps know where they stand and their activity against goals (and be sure to then use this dashboard in one-on-ones as a point of reference).

6) Anticipate staffing challenges

Things happen. Aim to have the total quota for all reps to equal 110-120% of the company target, giving you some wiggle room for any unexpected challenges.

7) Reserve a compensation budget for ad-hoc SPIFF’s

When you are planning for 2014 budgets be sure to account for spiffs and competitions on the sales team, rather than scrambling for resources to support a competition mid year.

Looking for more tips for designing your sales compensation plan, watch our webinar with Michael Hanna, “Show Me the Money: Sales Compensation Plans that Won’t Fail!”