Fine tuning the sales compensation plan

by Lidia Spencer.
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A sales compensation plan is not chiseled in stone. Your responsibility is to continuously fine-tune the drivers to adjust to changes in the business environment. Some of these changes might be:

  • Changes in organizational direction
  • Changes in organizational needs
  • Changes in leadership
  • Changes in competition
  • Changes in customer wants and needs
  • Changes in the economy (locally, regionally, nationally, or globally)
  • Changes in resources
  • Changes in sales personnel
  • Changes in territory design
  • Changes in regulatory issues
  • Changes in demographics, psychographics, or lifestyles
  • Changes in supply of product availability
  • Changes in technology

Remember, though, that too many changes increase confusion and result in a sense of insecurity among the members of your sales team. Try to provide a sense of stability to the largest portion of the compensation package (perhaps the straight salary portion), and make adjustments annually to the smaller portion. Prepare a spreadsheet for each salesperson that compares what he or she made last year to what you project he or she will make this year using the same model. Determine who will make more, who will make less, and who will make the same. Determine the overall cost of sales for the corporation and its impact on the margin.

Next, try out other plan models and evaluate the impact on the bottom line. Which one rewards the right salespeople the best? Which plan meets the organizational objectives? Which plan meets your personal sales strategy? Which plan will attract and retain the best talent and drive the best behaviors?

Try out your thoughts with your sales team and get their input. In the end, though, you will need to make the final recommendation or decision

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