5 Tips to Optimize Your Sales Compensation Plan

Sep 16, 2021

Even if you smashed all your targets last year, there are probably several highly profitable ways to optimize your sales compensation plan.

Here are five of the most common ways to optimize your comp plan that can boost performance in almost any organization.

1. Look for areas that are causing disputes

One of the most costly issues for sales organizations is ongoing commission disputes. If your team is regularly complaining about commission, they either don't understand it properly, or there's a problem with your process.

Commission disputes create ongoing discord in the organizations, erode trust, increase turnover, and generally put a drag on growth. If your incentive comp process constantly produces errors, improving your processes and communication to reduce commission disputes should be your priority.

2. Lock-in incentives

Nothing demotivates employees more than when a promised (or implied) incentive doesn’t materialize. Avoid areas of the commission structure that are left open to managerial discretion or interpretation.

That means no ambiguous definitions or double-meanings. And no subjective or implied incentives of the “do this and I’ll look after you” nature, which have such broad meaning as to be meaningless.

Take a strong stance with this. If a promised incentive or bonus isn’t formalized in the commission plan, it doesn’t exist. That means if it does exist, pay it out. It’s bad enough that some large companies view paying salespeople their compensation as optional, or at least something to avoid at all costs.

When your team knows they’ll get what’s due to them, that you’ll always deliver what you said, they’ll go that bit further for you.

3. Elevate for the middle

Most sales performance management strategies focus on encouraging and rewarding top performers and identifying and eliminating the worst performers. That leaves out a huge chunk — that vast majority — of salespeople.

Most people are in the 'middle of the pack,' so a small increase in quota achievement across this segment could bring huge returns.

4. Identify pointless incentives

Every business has them: leftover bonuses, promos, or multipliers that never get used. Incentives that don't motivate behaviors aligned with business goals are pointless. You are wasting more money on administrating them than you get in return.

Look for incentives or targets that:

everybody gets without much effort (or assumes they'll get)
nobody achieves (or thinks they'll get)

If you're unsure whether an incentive drives behavior, drop it for a quarter and see what happens. Sales reps may kick up a fuss if they’ve been relying on that commission for a while, but as long as you provide ample opportunity to make it up elsewhere, this shouldn't be a problem for long.

5. Plan some SPIFs

Most organizations leave money on the table by only running SPIFs in reaction to events or market conditions instead of using them as part of their ongoing promotional cycles.

Even organizations that run periodic or seasonal sales promotions often fail to track them properly and analyze their success. One simple way most organizations can improve the performance of the sales comp plan is to create a SPIF calendar to combat historically slow sales periods or take advantage of seasonal opportunities.

This is one of those tips that seems so obvious you would think everyone does it. But, a lack of useable historical data and the resources to analyze it means most companies simply don’t have the time for anything more than ad-hoc and reactionary SPIFs.

To learn more about how to create SPIFs that drive predictable revenue growth for your organization, download our free guide to SPIFs that work.

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