What does it take to be a world class sales organization? The most successful companies motivate attract and retain top talent, all while ensuring their incentives drive performance and growth. But there's more to sales compensation than sales commission structures. Best-in-class companies maximize their sales compensation by designing incentives to drive sales behaviors aligned with goals and achieve high ROI overall.
The key to this is data-driven sales planning. When sales plans and incentive compensation are based in data, decisions are more strategic and performance is higher. When it comes to building best-in-class compensation plans, sales leadership should aim to gather data that helps them answer the following questions:
- Are we paying competitively enough to attract and retain top sales talent?
- Are reps meeting quotas as often as they should be?
- Are current incentives driving the right sales behaviors?
- Do current compensation plans motivate reps to meet quotas without “over-motivating” them financially?
- Are reps being compensation appropriately for their performance?
These questions help leadership uncover the performance of past and current sales compensation plans. Ultimately, this historical insight helps determine the best incentives and compensation structures for future planning. Getting the right start on incentive planning should begin with gathering data to answer key questions.
Maximizing Sales Compensation with Data
To achieve best-in-class status, organizations must use data as a strategic planning tool. This is especially important when it comes to sales compensation planning. To start, look at historical data on sales team performance and ask the five following questions mentioned above.
1. Are reps meeting quotas as often as they should be?
A good starting place for maximizing sales compensations is historical performance. Your compensation plan and sales plans (capacity, quota, territories, etc.) are all connected. So looking at past performance can help you look holistically at your planning effectiveness.
At the most basic level, quota attainment tells you how effective your compensation plan was and if your quota planning was accurate. It helps leadership identify if incentives were motivating enough to encourage reps to meet and exceed quota. It also shows how quota attainment relates to the amount of incentives were paid out—ideally answering the question: Was our compensation plan too generous because of a low quota or not generous enough for a high quota?
2. Are current incentives driving the right sales behaviors?
In order to maximize sales compensation and for plans to be effective, they need to drive the right actions. Ultimately, this means that incentives must be aligned with company initiatives and goals. Historical sales data can help identify whether or not incentives were in line with goals.
Again, this stems partially from quota attainment. Did the organization have a high number of reps meet and exceed quota, but fell short on corporate goals? This might be the result of misaligned incentives in conjunction with poor quota setting. On the other hand, a company that had a high number of reps meet and exceed quota and nailed their targets had incentives that drove performance and were aligned with goals.
3. Do current compensation plans motivate reps to meet quotas without “over-motivating” them financially?
Imagine the following scenario: An organization unveils an aggressive compensation plan with high incentives thinking it will motivate reps to hit numbers. More likely than not it will. But come to the end of the year, the company looks back at their forecasting and ended up paying out more in commissions than revenue was brought in.
Sales incentives should be motivating (or why should reps do anything?), but not to the point that you're over-paying them at the expense of organizational growth. Best-in-class companies maximize sales compensation by finding a balance between motivating incentives and realistic incentives.
4. Are reps being compensation appropriately for their performance?
Again, paying reps fairly is key, but their performance should reflect the pay their earning. This ties back to benchmarking for adequate pay, but leaders must also consider pay differences for top-, middle-, and bottom-tier performance. Overpaying poor-performing reps will just kill morale and performance just as quick as underpaying high-performing reps. And more often that not, either scenario results in turnover, so finding the right balance is key.
5. Are we paying competitively enough to attract and retain top sales talent?
Competitive pay is crucial to attracting and retaining top sales talent. Best-in-class companies must focus on ensuring compensation is equal or better than the average pay in their industry. When reps aren't paid adequately—or more importantly, competitively—enterprises risk missing out on top hires and losing their top reps. Sales is an incentive-driven position, and they'll follow the money to greener pastures if you can't compensate accordingly.
The best way to ensure your pay mix is competitive is through benchmarking. By benchmarking incentives, organizations can level the playing field and ensure they are paying reps fairly. This gives you the best chance to attract top talent and retain your high performers in the long run—not to mention, when the incentives are good, performance follows suit.
Using Data to Maximize Sales Performance
In the age of big data, sales managers not using data to drive planning are setting themselves up for poor performance—honestly they're laggards—way behind the competition. Without visibility and insight into sales performance, leadership can't truly maximize sales compensation or drive growth.
Using data-driven planning, organizations set themselves up for more strategic decision making (because plans are backed by data) and their sales team is primed to succeed—it's a win-win for everyone.
Want to learn more ways to maximize sales compensation? Download "4 Best Practices to Increase ROI for Sales Incentive Compensation" to see how you can drive growth with compensation.