6 Most Common Sales Compensation Mistakes

6 min read

If your company is like most, you’ll probably perform the annual review of your sales compensation plan and make adjustments where the company sees fit. Using data from previous year’s compensation plans and the outlook for next year, your goal is to build a plan that not only works for the sales reps but also meets the goals of your company. However, it’s not always as easy as it sounds. Even with the best effort of everyone involved, creating comprehensive plans can be diffcult and laden with loopholes.

Review the list below to make sure you aren’t practicing one of the 6 most common sales compensation mistakes.

1. Recycling the Same Plan Over and Over

One of the most common and most detrimental mistakes in sales compensation is the practice of reusing old plans year after year. If it didn’t work the first time, why would one think it might work the next time? Even if you did have success, don’t be afraid to make broad changes to the current compensation plan.

Evaluate your plans As a whole, then get granular using analytics to find weaknesses and uncover new opportunities. Look for innovative ways to engage and reward your sales team; try non-monetary incentives and incorporate new special incentives.

2. Rushing the Process

The process of creating or revamping a comp plan is not the speediest. However, many companies optimistically think otherwise and leave themselves little time to gather previous data, review, and then write the new plan. Be sure to get all the right people at the sales compensation table, such as executives from sales, marketing and operations.

You may also want to include your compensation analysts, a sales rep or two and perhaps an independent third party sales compensation consultant. When you pull together the right people with time on their side, you’ll be able to fully vet the plan before implementation.

3. Not Creating Enough Flexibility

To ensure your plan will last you throughout the fiscal year, plan for flexibility and updates. Make sure you can easily adjust your incentive compensation plans to respond to changing market conditions. Sales incentive compensation plans don’t operate in a vacuum; they work in a constantly changing environment. A solid compensation plan must adjust to a wide variety of conditions.

4. Over-complicating 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.

5. Ignoring Data and 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.

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: 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. In the 1980 historic case of Dun & Bradstreet, their 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 to include product the customer had not ordered. Even though customers did not ask for them. By 1989, the company faced millions of dollars in lawsuits.

Find out more about Xactly Incent Enterprise and learn how the automating incentive compensation and creating the right plan can eliminate errors and inspire your sales team.