It seems so simple; you want a sales compensation plan that motivates your people to sell more of your products and services. This should be fairly straightforward and easy to do, right? Well, not always. I’ve seen many plans not only fail to motivate people, but cause resentment in the process by the way they’re written, introduced and implemented. The following are some guidelines I’ve developed to help you.

  1. Determine exactly what you want each of your salespeople to achieve. The plan should contain at most five very clear and specific objectives. More than that and some objectives may become meaningless to the people trying to achieve them, or could result in a lot of effort expended with very little return.
  2. Decide how much importance you want to place on each objective. In the case of new or potential customers, increased market share may be what you most want. With current customers, perhaps profitability or receivables collection is most important.
  3. Be certain the goals don’t conflict with each other. For example, profitability and market share goals can sometimes conflict when price is a key factor in how your customers make purchase decisions. If conflicts are inevitable, decide in advance how your people should handle them, and communicate your guidelines clearly.
  4. Customize the plan somewhat for each individual. You might want to incentivize people working with potential prospects differently than those working with current customers. Just be certain that exceptional performance will be rewarded fairly regardless of the objectives you set.
  5. Meet with each sales person and explain the plan, what you want the person to achieve and why. If there are constraints like pricing or margin minimums, be sure they’re spelled out.  Ensure that people clearly understand how and when they’ll be compensated for various achievements. Finally, talk about any advantages you offer besides money. For example, do you offer a career path that’s better than that of your competitors? Do you have the best, easiest to sell products and services in your industry? Is your stock plan better because you grant more shares or vest them faster? These and other benefits are worth something and are part of what differentiates you from other employers. Don’t hesitate to use them when talking about compensation.