Does Your Sales Compensation Package Encourage Bad Behavior?

At the heart of any successful sales organization are sales professionals. They are the driving force for revenue for their employers and are expected to do the “heavy lifting” when it comes to boosting company earnings. Success in sales is fueled by ambition and motivation of each team member, and a complementary force to help achieve desired results is the organization’s sales compensation plan.

A well-designed compensation plan aims to reward behaviors that will result in positive sales outcomes, such as closed “won” opportunities, cross and up-selling to existing clients, or the renewal of existing paid subscription customers.

Ultimately, a good sales compensation plan should reward and incentivize professionals to do their best, and strive to achieve more. Unfortunately, poorly designed sales compensation plans can have the exact opposite effect, and become an Achilles’ heel for companies.

A poorly designed compensation plan can sometimes lead to “undesirable” behavior by sales professionals, such as when the reward structure is set up in a way that it will tempt individuals into making bad choices during the sales process. Examples can include:

  • Selling at margins lower than what the organization is comfortable with
  • A failure to maintain and follow a standard sales process (in other words, cutting corners)
  • An unwillingness to cooperate with team members
  • Disregarding regulation and compliance altogether

But tackling an ineffective compensation plan is not only about making fundamental changes to its design, but also about the execution when it comes to these policies. Keeping a careful eye during the implementation process is essential.

Here are some steps to help achieve a smooth sales compensation implementation process:

  1. Design a sales compensation plan that is based on company objectives.
  2. Try to avoid a plan that is too complex for your staff to understand. A simple, easy to understand plan will make it easier for employees to adhere to.
  3. Create a plan that has motivational factors for each salesperson. This will help them capitalize on those opportunities, and feel a sustained sense of motivation.
  4. Conduct sales compensation plan “health checks” at regular intervals, and incorporate corrections and revisions at every stage based on feedback. Sales compensation plans should be reviewed and revised periodically. At the very least, there needs to be a review on an annual basis. This will help ensure that your compensation packages are never stale. Employees will rest assured that their plans are updated to account for changes in the market, new product rollouts, consumer behavior, and competitor offerings.
  5. Most importantly – educate your sales team about the sales compensation plan and how they can use it to make more money. If they do not understand the plan, they will not modify their behavior and will continue selling the only way they know.

Ultimately, the importance of a well-designed sales compensation plan is integral to the long-term health of your business, and your salespeople. Keeping an open line of communication is incredibly important amongst the sales team, in order to ensure that everyone feels heard and that their contributions are meaningful.

Designing and implementing an effective sales compensation package will do wonders for boosting morale, and helping your sales team accomplish their goals. Having this in place will help drive desired behavior, and keep your team happy and satisfied in terms of their own professional development and growth.