The problem for so many sales managers is how to design a motivational sales compensation plan that keeps sales reps motivated to perform. It’s a delicate balance between:
- Setting quotas high enough to challenge the best solution sellers but low enough to be considered attainable
- Defining sales territories with enough potential as well as some sure bets
- Providing a competitive base salary versus commission based upon performance
- Rewarding behaviors and activities versus sales results
If only there were a formula for an acceptable and motivating solution. It seems that no matter what plan a sales manager puts together, there will be complaints and misalignments.
Finally, but only relatively recently, there has been some promising research that can point toward a compensation solution that will work for most. The studies involve practical analyses of the pay and sales data of actual companies and field experiments using different pay structures and their sales results.
Here are some of the recommendations based on the latest solution selling training research:
- Keep It Simple
As much as you would like to design a system that is based on what incentivizes each individual sales rep on your team, too complex a plan is not only difficult to track and administer but also invites concerns about fairness and can lead to resentment.
- Know Your Market
The pay level must be competitive in order to attract and retain top talent.
- Strike a Balance
The right balance of salary and incentives varies with the industry and with how much a sales rep’s hard work will directly influence sales results.
- Be Timely
Payout periods are up to each company. In general, shorter pay periods are more likely to keep low performers engaged and motivated.
- Include Non-Monetary Rewards
On some teams, it is effective to combine monetary and nonmonetary incentives, like special reward programs and contests.
- Remove Any Caps
Though caps on overall earnings are rather common in large companies, this arbitrary ceiling is apt to demotivate high performers and negatively affects company earnings.
- Be Steady
The practice of ratcheting (or resetting) quotas also has a negative effect on overall sales.
- Be Upfront and Non-Discretionary
The motivation to work is greater when one strives for a reward than after receiving one.
The Bottom Line
The overall recommendation is to experiment a bit with your total compensation package to determine what works and what needs to change for your specific sales organization. The goal is to find the recipe that motivates a change in low performers, rewards high performers, and nudges average performers to higher performance.
To learn more about how to design a motivational sales compensation plan and take your sales team to the next level, download How to Optimize Your Sales Force in the Face of Increased Performance Pressure