Finding the right compensation plan for sales personnel can be a bit of a balancing act. On one side, you want to fairly reward your sales staff for the revenue they bring to your company. On the other hand, haphazardly committing to a pay structure without assessing your organizational culture and structure may lead to unintended consequences. Additionally, the compensation plan you choose will affect staff motivation levels, as well as retention and employee satisfaction rates.
Every organization has unique sales goals and processes which impact how the sales team is paid. However, there are a few general guidelines that help leadership determine a compensation plan that creates a balance between motivation and cost.
Compensation factors to consider
No matter what compensation plan you decide to implement at your company, it needs to be easy to understand. If sales employees are confused about how their work affects their paycheck, it will create unnecessary risk - usually in the form of low retention rates.
For instance, when you set sales quotas for your staff, you need to determine the right balance between numbers that are too aggressive and figures that fail to motivate. When quotas are easy to hit, sales staff may fall into work patterns that aren't conducive to growth. When they're too aggressive, your sales staff will be stressed out.
If you don't know where to begin, consider conducting competitor research to learn how other companies in your industry structure their compensation plans. Also keep in mind that some industries are regulated and direct sales may be prohibited. We've put together a collection of the five most common compensation strategies to help you get started. Check out the inforgraphic below to learn more: