Is Your Sales Compensation Planning Program Truly Balanced?

Introduction to Interim Sales Compensation Planning Programs

Throughout the years, we have often seen that sales compensation plans are primarily based on output performance measurement. And, of course, that seems to make sense. The outputs—whether top line, account profitability, net revenue, market share, volume, or many others—are the KPIs that propel the results of an organisation and its financial outcomes. 

In BrainTower’s experience, we have frequently observed how this approach unfortunately does not always foster collaboration, engagement, and commitment across the entire organisation. Even worse, sometimes the sales compensation planning process appears to be a rushed, last-minute, standalone exercise at the end of the annual budget cycle—merely a quick fix that does not drive the desired behaviour, let alone the desired financial impact. 

In these times, where many companies are still absorbing the massive inflation hits in their P&Ls—and where deflation may be looming on the horizon—sales compensation is often used to drive quick sales, just as marketers sometimes focus too much on pricing promotion tactics to drive volume but are surprised when the brand franchise is jeopardised. 

At BrainTower, we believe that sales compensation planning is a commitment that involves the whole organisation. It starts while you are building your roadmaps, creating your OGSM documents (Objectives, Goals, Strategies, Measurements), and developing your brand plans. This is the time to engage in extensive debates about the real drivers of your business and to understand how measuring these drivers will generate the desired outcomes. This is what truly creates success. 

Design an effective sales compensation program

Designing an effective sales compensation program is vital to aligning your sales team’s goals with your organization’s broader objectives. Here, we’ll provide you with practical tips on how to establish a balanced sales compensation plan, illustrated with examples and structured in an easy-to-follow format. 

Tip 1: Define Clear Sales Performance Metrics 

Key Performance Indicators (KPIs): 

• Revenue Targets: Compensation linked to individual or team revenue achievements. 

• Customer Retention: Bonuses for maintaining long-term client relationships. 

• New Accounts: Incentives for acquiring new clients. 

Example: A table of incentives for different tiers of revenue targets: 

Tip 2: Incorporate Non-Financial KPIs 

Non-financial metrics can encourage behaviors that lead to long-term business health, such as customer satisfaction and team collaboration. 

Example: 

• Customer Satisfaction Scores: Offering bonuses for achieving high customer service ratings. 

• Team Goals: Rewards for collaborative achievements in cross-functional projects. 

Tip 3: Structure Multi-Tiered Compensation Plans 

To cater to different roles within your sales team, consider a multi-tiered compensation structure that reflects the varied levels of responsibility and contribution. 

Example: A breakdown of compensation structures by sales roles: 

Tip 4: Regularly Review and Adjust Compensation Plans 

Regular assessments ensure your compensation plan remains aligned with market standards and organizational goals. Adjustments may be necessary due to economic shifts, market changes, or changes in business strategy. 

Example: 

• Annual Review: Schedule yearly reviews of compensation plans to adjust for inflation, market competitiveness, and company performance. 

Tip 5: Transparent Communication 

Transparency in how the compensation plan works fosters trust and clarity. Clearly communicate how rewards are calculated and distributed. 

Example: 

• Information Sessions: Hold quarterly meetings to explain the details of the sales compensation plan and gather feedback from the sales team. 

Practical Implementation: A Step-by-Step Guide 

1. Assessment: Evaluate current compensation plans and identify areas of improvement.
2. Design: Based on the assessment, design a balanced compensation plan using the tips provided.
3. Implementation: Roll out the new plan with clear communication and training.
4. Monitoring: Continuously monitor the plan’s effectiveness through sales performance and team feedback.
5. Adjustment: Make necessary adjustments annually or as required by changing business conditions. 

Conclusions on Interim Sales Compensation

If your goal is to motivate your sales department, have a solid compensation plan, or simply bring in fresh expertise without the long-term overhead, interim management in sales might just be your best decision this end of summer.

Have you ever considered an interim sales for your team? What are your thoughts or concerns about this compensation approach?

If you wish to discuss further any of the above points, as well as seeing how we can support your sales or overall business.  Please do not hesitate to contact us via the online form or give us a call.