When developing a new plan, leaders shouldn’t only consider the target pay for each job. They should also think about how much variable pay the job should include.
Variable pay is a powerful motivator, but it can backfire without the right pay mix. Too much variable pay makes sales reps into independent operators sometimes unwilling to take chances for the company. Too little and sales reps may not be motivated enough.
The trend is detailed in the latest industry research from The Cygnal Group. It recently appeared in Selling Power Magazine’s inaugural custom edition—Why 100% Variable Pay Often Produces Undesirable Results.
Here are at few recommendations from the article:
#1. Link variable pay to a rep’s control over the sale
Match percentage of variable pay with how much your sales reps directly influence a sale. If they do all the legwork, increase their variable pay. On the other hand, limit variable pay when specialists or tech staff help complete the sale.
#2. A 50/50 split is a good starting point for most plans
A 50/50 pay mix is ideal for most sales roles. Companies have enough influence over rep behavior, as well as accounts and territories. And reps have control over enough of their pay check to stay motivated to sell.
#3. Increase Contact with Reps Through Annual Reviews
Commission-only pay makes it difficult to measure sales performance beyond sheer numbers. With fixed pay, you influence how reps handle administrative tasks and work with others. This is the key to holistic performance.
You can read the full article here.
Want more from the experts at The Cygnal Group? They help make sure you start 2012 off right in this webinar on redesigning your sales compensation plan.
From The Cygnal Group’s expertise you will learn how to:
- Avoid common mistakes in designing sales compensation plans
- Optimize pay mix for different sales roles
- React with control and flexibility to changes in competition or customer needs
