How to Design and Implement a Sales Compensation Plan

How to Design and Implement a Sales Compensation Plan

How to Design and Implement a Sales Compensation Plan

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Author: Rick Roberts

Compensation planning is an integral part of sales operations. Of course, money is one of the greatest motivators, but a compensation plan is more than money. The purpose of a compensation plan is to align your corporate strategy with your customer experience (CX) and sales strategy. If you’ve never designed a compensation plan before, here is a step-by-step outlining how to do so. If you have any questions and want to speak with a veteran comp plan designer, Canidium is here to help. Just click the button at the bottom of the page!  

Watch this video to learn the importance of employee compensation
within your sales organization:

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Step 1: Outline your company’s short term and long term goals

Don’t only look at beating your previous year; make sure that you’re setting both short-term and long-term goals. Everybody wants a bigger year than last year, but what type of company do you want to be five years from now? It would be wise to include key stakeholders from different departments in this conversation, or even survey your salesforce to get a sense of everybody’s priorities. Designing a compensation plan in a vacuum is a bad practice that may come back to bite you! The answers that you come up with in this phase will be the focal point of your compensation plan, since the next few steps will come together to help achieve these goals.

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Step 2: Determine what behaviors you want to incentivize, and how

When coming up with your strategy, don’t just look at it through the lens of what will motivate your reps. Remember, your compensation plan must align your reps’ objectives with company goals. If your goal is to compete and win on customer service, then you may want to reward reps who have higher customer satisfaction and retainment scores. If you think that reps are pushing certain products and services over others because they are easier to sell, but another has better profit margins, then you may want to reassess what you pay on each. Every business will have unique goals and situations, but no matter how you slice the pie, you want to be sure that your company's goals are being achieved. Finally, make sure that your tactics for incentivizing good behavior are compliant with the laws of the region, whether that’s state, federal, or global. 

Asset 4100Step 3: Determine your total costs; Commissions are just one part of compensation

A “total compensation plan” accounts for more than what commissions and bonuses will cost you - it also accounts for salary, salary raises, and benefits. If your salesforce is salaried, then you may want to account for raises during the year. If they are hourly, you may want to account for overtime during your busiest selling seasons. One way of retaining top talent is through stock-options or equity, another potential cost. If you have tunnel vision and are solely focused on commissions and bonuses, then you may have a few holes poked in your plan later in the year. 

Step 4: Getting buy-in for the budgetAsset 2100-1


By now you’ve done the ground work and established your business strategies, tactics for incentivizing behavior that support company goals, and determined approximately how much it will cost you; now it’s time to get buy-in. Whether you’re appealing to a board or the C-suite, be sure to go to them with a roadmap that clearly defines your strategies and tactics. Your goal here is to get their buy-in, not spend the entire meeting being derailed by questions over minor details. We recommend visuals, as those are better absorbed. Most importantly, make sure that everybody walks away with a clear understanding of how this compensation plan will help the company achieve its both short-term and long-term goals. 

Step 5: Communicating the compensation plan

You’ve gotten the buy-in from leadership! Now it’s time to communicate the coming years plan to the sales organization. There are many tools for communicating this; email, all-hands meetings, webinars, etc. - but there’s only one purpose; to make sure your salesforce clearly understands their personal goals, company policies, positive and negative outcomes, and the overall company goals. A company thrives or fails as a team. It’s recommended that you obtain their signatures, whether that’s with docusign or another means.

Step 6: Manage, Analyze, and Optimize

Communicating your compensation plan isn’t a one-and-done deal. Remember, the whole point is to align your incentives with company goals. Let the data inform you and prescribe what is needed for a steady course toward your goals. Make optimizations, and then communicate any changes with your organization. 

Designing and implementing a compensation plan can seem like an intimidating task, but these tips will help take the weight off of you. If you want to speak with an expert about compensation planning, just click the button below, or go to!


Find the author on LinkedIn: Rick Roberts, Lead Digital Marketing Specialist, Canidium


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