Sales incentive compensation plans don’t operate in a vacuum.  They work in a constantly changing environment.  Do you know how to write a compensation plan that’s balanced?

Avoid the most common incentive compensation mistakes when writing your plan. (See here for Mistakes #1-3.)

Mistake #4 – Over-complicating the commission plans

Sales reps will never read a document that could double as an encyclopedia.  If you can’t quickly explain your sales compensation plan with a visual chart or diagram, go back to the drawing board. Your plan doesn’t need to encompass every potential sale, it only needs to address the most common scenarios with a bit of flexibility for special circumstances. Write these rules into your commission tracking software.

Read this article from MIT to customize your sales plans for success.

Mistake #5 – Ignoring data + the backstory

Sales history tells the most accurate tale of what will work and what won’t. Before finalizing a new plan, run some quick reports from recent quarters and years in your commission tracking software. Run several what-if scenarios for the proposed plan, and see which is best.

Read why data is at a premium in the CRM industry. Good, clean data means good, clean profit. The key is knowing what to do with it.

Mistake #6 – Forgetting to troubleshoot!

You’ve heard of a post-mortem analysis. Run a pre-mortem analysis before you go live with a new incentive compensation plan. Here are some questions to ask:

1. How could this plan fail or be exploited?
2. Do my SPIFs and incentives motivate sales reps to perform all quarter, or just at the end?
3. Do I assign work in any part of the sales cycle without correlating incentives + commissions?

The wrong sales performance measures can have significant unintended consequences. For example, problems occur when too many incentives rest on one part of the customer relationship. At Dun & Bradstreet in the 1980s, the sales team earned no commission unless the customer bought a larger subscription. Renewal incentives were not awarded. As a result, sales reps changed customer orders, even though customers did not ask for them. By 1989, the company faced millions of dollars in lawsuits.

Read more historical examples of epic sales comp failures here: Unintended Consequences—Lessons From Sales Performance Measures Gone Wrong.

So what SHOULD you do?
While the exact features of successful sales compensation plans vary by industry, company, and sales role, they all share certain critical elements:

• Having the right people on your sales comp plan design team
• Choosing the right sales performance metrics
• Offering reps real-time visibility into their progress
• Giving managers and execs the rapidly generate reports that make sense of past sales results, and run what-if scenarios to predict future success.

Good sales plans, good sales performance.