Get Your Sales Comp House in Order

4 min read

Good compensation management aligns your goals with your sales incentives. Changes in your business should mean changes to your sales compensation plan. Your plan tells sales people – not so subtly – what to do. If it doesn’t reflect your goals, you won’t meet your objectives. That’s part of how compensation management works.

Sibson Consulting expert Joseph DiMisa, a World at Work accredited instructor, laid out ways to ensure that your sales compensation plan rewards behaviors that get the result your business needs in a recent Xactly-hosted webinar. While a good compensation plan won’t replace actual managing, DiMisa points out that a well communicated, clear plan helps drive success. Want proof? Try a special contest, or SPIF, by adding an extra incentive to a product.

SPIFs (Sales Performance Incentive Funds) are useful tools to promote new products, services or bundles. When a business shifts toward a new area with a new product, the incentive makes sure the sales team follows. (It is also a useful way to reward reps when sales people aren’t able to meet quota because of events outside of their control.)

But, DiMisa warns, such special incentives – like any management tool – can be dangerous. If you put too much money into it, your sales team may focus on the featured product to the detriment of legacy offerings. It does require a balance to do well. Now you can see how incentives like SPIFs focus your sales team. Let’s look at some of DiMisa’s tips for aligning your strategy with the rest of your sales incentive plan.

Focus, for example, on the type of revenue your business is trying to generate. Is high churn dragging you down? Is the company trying to penetrate particular industries? Is straight customer growth the focus of your next fiscal year? Your compensation plan can help.

  • To decrease churn, consider limiting payouts until a certain percentage of a sales rep’s accounts renew their contracts.
  • To increase new customer wins, offer an increased commission percentage or bonus for new customer attainments.
  • To focus your sales team on particular industry, offer rewards similar to those suggested for new customers as recognition for wins in the coveted vertical.

Combined with good management and clear roles, using the right metrics for your compensation plan can increase your company’s cash flow, help hold on to customers through long-term contracts or even encourage a team environment. Good compensation management software can help make all of that happen.