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Devising a Good Sales Compensation Plan

If you have a sales driven organization, it becomes imperative for you to ensure that your sales force is well motivated and ready to take on the big, bad world of business development and sales. A lot of companies depend hugely upon the foot soldiers of their sales team to scout for new businesses as well as source repeat business from existing clientele. Every CEO and HR manager is quite concerned about keeping the sales force happy and productive in order to win the war for market share and revenues. Part of the package that a company employs to keep its sales force engaged deals with devising a good sales compensation plan.

A lot of companies try to buy sales compensation plans ‘off the shelf’ or conduct a little survey here and there to check out what the competition is doing with the basic intention of devising a good sales compensation plan. But that’s where the flaw in the basic premise lies, because the vision - financial status and strategies of each company is different. One must be careful to devise a plan that is best suited to a company’s specifics instead of blindly aping what might have worked for others. The key to devising a good sales compensation plan is to evaluate one’s own profitability and derive a plan that motivates the sales team to drive its own objectives in the market place better. For instance, some companies are very bottom line driven, whereas others could look at market share as well as top line growth. The sales compensation plan would thus have to be geared to meet the particular objective and motivate its sales force accordingly.

Some of the basic components of compensation plans for the sales force include having a well balanced compensation structure that is a mix of fixed salary, incentive pay as well as perks and benefits. Typically, sales people have great visibility and a sense of what is it that they need to achieve in terms of targets or goals per quarter, half yearly or annually. These goals are denominated in dollar terms or unit sales terms. It is thus possible to lay out clear incentive plans that would drive better performance in measurable terms. Devising a good sales compensation plan would mean clearly defined targets and well linked reward plans that give the sales person a clear idea of what he/she needs to do in order to achieve targets. A well thought out balance between the various components of compensation in line with the company’s mission as well as its overall compensation philosophy would go a long way in boosting the business profits.

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