The Best Method to Sales Compensation Madness

The Best Method to Sales Compensation Madness

The Best Method to Sales Compensation Madness

No comment Share

Author: Bailey McCaffrey and David Kohari

There are many things that go into your sales operations, and compensation planning can be one of the biggest challenges. With the right sales compensation methodology, you can get  your operations right the first time. This can ultimately help you increase teams performance, retain top talent, and align strategy to corporate goals. 

Everyone knows payday is the reason we go to work each morning.

Maybe it’s the feeling of seeing your bank account rise, or, it’s your excuse to treat yourself to a new hairdo, a nice dinner, buy tickets to that ball game, or put a little cash away for a rainy day. 

For your employees on variable compensation, it means more than just cash into your wallet! Payday is a hard-earned reward for each lead found, relationship cultivated, and deal closed. It’s why top sales reps always go the extra mile beyond what’s asked of them. 

But no sales team is ever truly reaching its maximum potential. So, how do you design a compensation plan that will keep reps aligned to corporate goals, while maintaining a happy, hardworking, and growth-focused mindset on your team? Getting all the pieces of the sales performance and operational puzzle to fit just right can be harder than it sounds. 

That is where the right sales compensation methodology can make a difference.

Here are five critical steps to help you most effectively design your sales team’s compensation plans.

Step 1: Identify GTM (go to market) strategy and align with customer experience (CX) and revenue generation strategy and objectives.

When it comes to sales, setting goals are everything. 

  • Are they challenging enough, but are they realistic? 
  • Do they encourage the right behaviors? 
  • Do they drive a better CX this year and for years to come? 
  • Will they drive maximum revenue for the company while also creating a positive employee experience? 

Sales Compensation is an important step when you’re designing your GTM strategy. Make sure to make these considerations in order to get the most out of your sales reps and employees.  

Step 2: Identify the right selling role(s) and the key performance indicators (KPIs) to measure and drive the right selling behaviors.

Based on the GTM strategy, identify what type of sellers you will need to ensure that you have the right coverage for the customer journey.  You might need account executives to bring in new logos, customer success managers to retain and expand your existing accounts or maximize recurring revenue streams - identifying these roles and then understanding how to drive their behaviors as well as measure and reward them for the right business outcomes is the foundation to great sales performance management.

Step 3: Design sales compensation plan(s) with a focus on rewarding top performers balanced with cost-effectiveness. 

In this step, access to historical and market data combined with the right analytics is everything, and for most companies, spreadsheets aren’t going to cut it. Based on the KPIs, model and determine the best way to ensure that your top performers in each sales role will be rewarded appropriately keeping budgets in mind.  With this foundation is put into place, strategically design territories and quotas for your reps that will help individual and company performance.

Of course, not all sales reps are the same. You want to design a compensation plan that will incent reps to perform at their peak level, as well as reward top earners so that you can retain your best talent. But both sales operations and management play a critical role in helping your reps to perform at those peak levels so it’s important to think about ways to move the needle that aren’t compensation-based, such as:

  • Accurate, transparent reporting - so reps know exactly how much they will make at any given time
  • Gamification and leader boards - encouraging friendly competition between reps and recognition by leadership
  • President’s club and other non-monetary ways to reward high achievers. (PTO, gifts, etc.)
  • Coaching and support systems - helping reps who are under-performing get on-track
Step 4: Determine the ongoing program effectiveness measurement, analysis and improvement strategy.

Sales compensation isn’t a one-and-done type solution. It will take continuous upkeep and improvement. Once again, tracking data is the key to the ongoing success of your sales operations and tracking/analytics systems make this easier to understand. By being willing to make changes as they come up, you will save your company time and money. Be proactive about making data-based optimizations to your plans as needed in order to drive the highest revenue and positive business outcomes. If you don’t maintain and adjust your plans on a regular basis, a more complete overhaul will be required sooner rather than otherwise.

Step 5: Develop and execute the plan communication and roll-out strategy.

Organizational change is never easy, but it’s almost always worth it; especially when it has to do with something as critical as sales compensation. The best way to get your sales team on board and excited is to create a strategy. Thoroughly communicate your goals, plans, hopes, and dreams to the team. Be sure to highlight what’s in it for them, and take the time to make sure your organization fully understands what’s changing before fully rolling out the solution. One way of making sure is to have anyone using the solution sign documents - such as with Docusign.


Canidium knows how important Sales Compensation is to your business’s success, so we hope this blog has armed you with the methodology to do it well. If you still have questions about How to Design and Implement a Sales Compensation Plan or What the Desired Outcomes of a Sales Compensation Plan Should Be just click the links to learn more!

If you prefer to speak to an expert about your compensation plans, just reach out to our consultants at canidium.com/contact.

Questions?

Find the author on LinkedIn: Bailey McCaffrey, Marketing Coordinator, Canidium
and David Kohari, SVP of Customer Success

 

Receive future pieces