What is Sales Compensation?

Every company strives to keep their salespeople motivated. This is because these employees are the key drivers of any business, whether selling services or tangible products. One way of ensuring the sales force is fully motivated is by compensating them properly for their work. The reward salespeople receive from their employers for their work is called sales compensation. The total sales compensation is calculated by summing the base pay, commission, and any incentives associated with meeting specified targets.

For organizations to manage the pay for their sales team effectively, it is crucial to design a sales compensation structure. A good payment structure will reward each sales employee according to their role in the sales cycle, their results, and rank, among others. Companies can also use compensation plans to encourage desired behaviors in individual sales reps so as to achieve specific organizational goals.  

How Important is Sales Compensation? 

A sales compensation is a solution a company can use to leverage specific incentives to influence certain behaviors in different sales roles. The compensation thus becomes a valuable tool for driving performance in sales reps of all levels in the organization. With that said, any good plan should be structured in a way that it can impact the different roles in a sales department.  

Does My Company Need A Sales Compensation Plan? 

Definitely! Successful companies have embraced sales compensation as a performance management tool. This is by designing their sales comp plans in a way to reward behaviors that can bring the kind of results the company is looking for. These results are also aligned with company goals. This trick will boost performance and encourage consistent results.  

An effective compensation plan should leave room for adjustments at different times of the year as company goals shift or market conditions change. Fortunately, we have sales planning tools that companies can use to get factual insights that will guide them in designing more practical compensation plans. 

How Should A Compensation Plan Be Executed? 

An important aspect of any sales compensation plan is its execution. No matter how good your sales compensation strategy is, ineffective execution will translate to frustration and minimal results. This is where sales compensation automation comes in.  

By automating the execution process of a compensation plan, the company ensures increased visibility of the comp plan among sales reps thus improving transparency. A transparent pay structure is vital to sales employee motivation. You can find other benefits of automating a sales compensation plan. 

What Are The Important Sales Compensation Features? 

The design of an effective compensation plan should be based on specific concepts. Among these are the defining factors that you use to measure individual sales role. Make sure to include elements that further goals that will impact the company’s bottom line.  

Besides promoting the desired sales behaviors, the plan should reflect the enterprise’s culture and philosophy. It’s also useful to benchmark all the components of your sales plan against the market best practices so as to ensure the competitiveness of your pay structure.