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Sales Compensation Planning: 5 Tips to Improve Performance in 2020

Sales incentives are the number one driver of team performance. Improve your team's performance in 2020 with these five sales compensation planning tips.

9 min read

Compensation planning season can be a hectic time of year for organizations. The process typically starts about 2/3 through your fiscal year with the goal of having a new plan locked and loaded by Q1. For the majority of companies, that means the sales compensation planning is in full swing now.

Getting your incentive compensation right is crucial. Without a solid plan in place or falling victim to sales compensation planning mistakes, you risk missing revenue goals—a scary thought considering CSO Insights found that on average, only 69% of organizations hit their revenue goals. With that in mind, there's no room for inadequate compensation planning.

To help, here are five tips to improve your sales compensation planning and increase performance in 2020. Then if you still have more questions, you can find answers to five common sales compensation planning questions and challenges here.

1. Get the Right People Involved Early 

Your revenue and growth goals affect your entire organization—not just the sales team. Because each individual department in your company has their own independent goals that feed into overarching goals, you need to bring in the right people for your sales compensation planning team.

You'll need representatives from Finance, HR, marketing and, of course, the C-suite—all of which can add valuable insight into the sales compensation planning process, and how it can help shape the direction of the business for the year ahead. These teams will also be key in ensuring everyone in your organization is aligned around the same plan and all aspects work towards company goals.

2. Use Data Insights to Drive Planning

Traditionally, sales compensation planning has relied heavily on leadership's gut instincts and what they expect to happen. However, the average VP of Sales tenure is now just 19 months—down from 26 months in 2012. Would you still trust your gut knowing if performance isn't good enough, it's your job on the line?

You need data insights to design your incentive plan effectively. Access to data allows you to focus on three key initiatives—all of which are vital for a successful sales compensation plan

1. Identify What isn't Working in Previous Plans

This is crucial. You need to know what sales commission structures, pay mixes, and other compensation elements are not driving the performance you need to hit goals. That way, you can remove them from your new plan and replace them or dive deeper into the performance data and use that insight to improve your new plan.

2. Understand What is Working in Previous Plans

Data insights also help you uncover the incentive design elements that are successful at driving performance in your past sales compensation plans. However, before you copy and paste these incentives into your new plan you need to further examine the data and identify if there are ways you can improve upon the performance of these successful elements. Then add in them into your new sales incentive plan.

3. Design Incentives That Drive the Right Sales Behaviors

For incentives to be successful, they need to drive the right sales behaviors, which means they need to be aligned with organizational goals. Data insights can help you better align incentives by combining elements that have been successful in past compensation plans and tweaking them for your new goals. To ensure your sales incentives are strategic and designed to drive peak performance, we suggest following the ABCs of Incentive Compensation Planning

3. Tailor Incentives for Different Roles

Sales compensation is one of the single most powerful levers for driving the direction of the business. However, it's not a one-size-fits-all motivation tool. Using the same sales compensation plan across your entire team might be tempting, but creating cookie cutter incentives fails for one main reason: no two sales roles are the same.

Consider the different responsibilities between an business development sales rep who spends much of their time cold calling and prospecting, your solutions consultant reps who demo products, and your sales managers, who are completing admin tasks and monitoring team performance. None of these roles have the same responsibilities—and their sales compensation plan should reflect that.

(You can get sales compensation planning templates for different roles on your team in our Complete Guide to Sales Team Compensation). 

4. Make Performance Analysis Continuous 

All too often, companies rollout their new incentive plan and call it good—only to look back on performance at the next planning season and find you're in big trouble and not on track to hit your goals. Hindsight is 20/20, but when it comes to sales compensation, it's not good enough. 

Once you rollout your incentive plan, you're job isn't done. Yes, the initial planning is completed, but as they say—there's always room for improvement. From the moment you implement a new plan, you should be continuously analyzing performance—at the very minimum on a quarterly basis.

5. Automate Your Sales Compensation Administration

Continuous analysis helps you identify performance trends and adjust plans for market changes more effectively—but if you're still managing your incentive compensation using manual processes, spreadsheets, or other homegrown systems—it's still not as strategic or effective as it could be.

Automating incentive compensation helps you plan and administer your sales comp more efficiently and strategically. But it takes more than just automating processes—an automated poorly-designed incentive plan is still a poorly-designed incentive plan—just automated.

You need to use data insights to strategically plan first before you automate processes to improve accuracy, efficiency, and sales productivity.

Improving Your Sales Compensation Planning for 2020

With strategic, data-driven sales compensation planning, you're setting your sales team up for success and can trust that your planning decisions are backed by data insights. When you automate this process as part of a sales performance management (SPM) strategy, you're taking the first step towards leading your industry and beating the competition.

Tools like Xactly SimplyComp and Xactly Incent help leaders like you manage your incentive compensation so that you can focus on strategy rather than the tactical execution of your sales plans. Discover how you can get started by taking our quick 60-sec sales performance management (SPM) assessment today!