The ABCs of Compensation Planning: How to Build Better Incentive Plans

May 15, 2018
2 min read
Sales compensation plans must be strategic to motivate sales reps to perform well. Understand the basic foundation with the ABCs of sales compensation.

The sales compensation planning process can be complex, and unfortunately, sometimes a headache. Luckily, with the right tools, sales operations can reduce the stress and time it takes to design, test, and implement a new compensation plan, and they can work to maintain and tweak the plan throughout the year.

Before you start building out the specifics of your plan, ensure that you have a strong team comprised of key players to drive the plan design process. The planning process can fall victim to many obstacles, so it is important to build a team that is primed to tackle any hurdles and keep key executive and company objectives as the plan focus.

The ABCs of Compensation Planning

Once you’ve put together your sales compensation team, you’re ready to dive into the plan design process. The planning process entails more than just your compensation plan, but at the very core, strong sales incentive plans address three main considerations. At Xactly, we like to think of them as the “ABCs” that create the foundation of well-designed compensation plans and drive the plan design process. 

A - Aligned With Sales Roles

First and foremost, your incentive plan must be aligned with your different sales roles. Your sales teams are made up of different roles, management levels, and responsibilities. Therefore, it is important to remember that each role is not created equally, and your compensation plans should reflect this.

Consider each member of your sales team. Reps, management, and leadership all have varying responsibilities. Tailor incentives to what is asked of each sales role in the sales process so they provide the best opportunities for your sales team to succeed.

 B - Based on Company Culture

The most successful companies are built on unique, distinct cultures that motivate employees and boost company morale. Your company and sales teams are no different–your incentive plan has a huge effect on employee motivation and morale. Consider the following questions when designing your compensation plan:

  • How competitive is your pay compared to the rest of your industry/market?
  • How do pay and incentives differ between high- and low-performing reps

The answers to these questions will help you determine the competitiveness of your compensation and ultimately design a plan that will attract and retain top talent, while driving middle and low performers to improve performance.

C - Constructed to Drive the Right Sales Behaviors

Ultimately, the framework of your compensation plan must be aligned with company goals so that it drives the right sales behaviors. Consider your corporate and executive goals, revenue targets, product plans and releases, etc. and creative incentives that drive the sales behaviors to help achieve these goals.

Well-designed plans keep simplicity as a top priority. A simple plan that drives the right sales behaviors enables sales leadership to better communicate the plan (learn incentive plan communication best practices here), which helps sales teams understand company goals and the benefits of the plan for each sales role.

Making the Most of the ABCs

Sales compensation is an important part of your sales plan and strategy. Using the right tools will help ease the stress of the planning process and give the sales operations team the data and analytics they need for a strong plan.

With a solid foundation, your sales compensation plan will help drive sales behaviors to reach company goals and strengthen your overall sales plan. Well-designed incentives will motivate sales reps to over-perform and ultimately, drive bottom-line growth.

  • Incentive Compensation
  • Sales Planning
Karrie Lucero
Karrie Lucero
Content Marketing Manager

Karrie Lucero is a Content Marketing Manager at Xactly. She earned marketing and journalism degrees from New Mexico State University and has experience in SEO, social media and inbound marketing.