What is the Best Sales Compensation Plan? The Simple Answer.

Posted by Xactly Media on December 27, 2012

One question frequently asked by sales compensation professionals is, “What is the best sales compensation plan?”

If you ask this question in a room full of experts, you may get two answers:

Do what others are doing in your industry; and
Do what your main competitors are doing.

But if there’s someone who really knows his or her stuff in the room, you may get a third—and better—answer:

“There is no ‘best’ sales compensation plan.”

The question about sales compensation does not have a one-size-fits-all answer. What gets good results for your competitors or for other organizations in your industry may not work for you. As a matter of fact, unless you get lucky it’s unlikely.

However, just because there’s no “best” compensation plan doesn’t mean there isn’t a sales compensation plan that’s best for your company.

Finding the best sales compensation plan doesn’t need to be hit-or-miss, nor does it need to feel like looking for the Holy Grail.

Here are five tips for building an effective sales compensation plan:

Understand your sales goals and objectives. Are your goals to increase sales? Grow your customer base? Once you understand goals, align them with your sales compensation plan.
Check with the experts. Make use of specialized resources out there, like our Xactly Plan Store. No need to re-create the wheel.
Factor in the variables. Consider personnel structure, the ages of your sales representatives, your industry’s economic climate, and if you are launching new products or services.
Use the past to impact the future. Using sales compensation management software, take a look at past and current incentives, performance, and territories to determine which sales compensation strategies have succeeded, and which have failed.
Assess. Check the data from your sales compensation management software frequently to see how your plan is working. The business world isn’t static. Your sales compensation software should be either.