Sales Compensation Plan Best Practices in an Uncertain Market

By Mike Emerson As the pandemic changed the way salespeople interact with customers, forget about bandaging disruptions to old sales compensation plans. Instead, seize this moment as an opportunity to restructure your sales compensation plan. Traditionally, companies have sought to change sales compensation plans to better align sales costs with growth and other business objectives, and salespeople settling into “comfort zones” by failing to match their activities and behaviors to what the market is doing. But now companies are seeing a new path forward that can better solve these issues by leaving behind legacy programs that tie income to territory. It’s clearer than ever that the value sales reps provide is migrating away from facilitating transactions and sharing product features and toward highly specialized sales teams that engage strongly in market-making activities. This creates a need for a fresh and rigorous sales compensation plan. Though redesign requires meticulous analysis and supportive implementation, if done correctly, it’s one of the most effective ways to realign your sales team around specific goals, attract and maintain quality salespeople, and cultivate a powerful collective culture. Here we share sales compensation plan best practices: Define What Success Looks Like Truthfully, creating a formula for a new sales compensation plan is the easy part, but beware of self-diagnoses that can lead to focusing on the wrong problems. Remember this is a holistic process that favors long-term health over short-term fixes. Instead, clarify specific goals that will align with a new sales compensation program that is built to last.

Imagine three years into the future and ask:

  • How will it make costs more consistent and lower?
  • How will it grow business by either expanding the customer base or earning a larger share of wallet?
  • How will it generate profitability around gross margin and costs to serve?