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Sales Compensation Plan

3 Ways Organizations Approach Sales Compensation Plans Wrong and How to Approach it Right

Your sales force is the engine for your organization. But for every engine, you need an effective fuel to ensure it operates smoothly and at a capacity that can help you reach your destination. As a sales manager, it is your utmost duty to ensure that your sales team personnel first and foremost are being compensated equitably for their efforts.

Without sales compensation software this can be difficult. It is too often the case that companies set up sales compensation plans with the intent of keeping a large chunk of benefit at the hands of owners or consist of so many rewards that end up in unnecessary expenses and drain of profits.

The key is in finding the right balance so that it benefits both the sales team and the future of the company. In this article we will look at 3 ways in which companies make a mess of their sales compensation plans and how to correct them.

Reusing the same plan over and over again

One of the biggest failures of a sales manager is to keep using the same sales compensation plans every single year not realizing that the plan might become outdated. Using the same plans for a long time can be detrimental to your organization, in that it can create apathy and result in lack of commitment in your sales team. Imagine getting the same commission and the same kind of rewards for multiple years? Why would anyone want to consider going to work after waking up in the morning?

The key is to always experiment with new ways of rewarding workers for their efforts. If you think raising the commission is a no-no, increase non-monetary rewards instead. This will ensure your workers feel more valued and commitment to their sales targets.

Lack of flexibility in the plan

Another big mistake you can make as a sales manager is to create a rigid compensation plan that gives no consideration to the changes in market conditions. A sales compensation plan should ideally be able to last one fiscal year. It if it is not flexible enough, you may have the trouble of revising plans or scrapping them altogether in place for another one.

To avoid this, anticipate the various changes in market conditions, economic factors, and other reasons and create your compensation plan around it.

Divorcing figures from the backstory

Never create a compensation plan that is not backed by data. Failure to do so will cause your sales incentives to be ineffective resulting in poor motivation of your team. Analyze different conditions and limitations and use it to determine what can best work for your sales team.

If you are looking for automate all your sales plans under one roof, you can consider purchasing sales compensation software. This complements your ERP and CRM software data and can make the task of creating accurate sales compensation plans a lot more easily. To find out more, watch the Sales Commissions product tour.

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