Thinking About Sales Rep Compensation Plans

by David Cummings

Sales rep compensation plans are super important and super challenging. There’s a necessary element of incenting the right behavior while keeping things straightforward and easy to understand. Too often companies make the compensation plan a tome with a corresponding Excel file required for some spreadsheet jockeying just to understand the different commission levers.

Here a few ideas to keep in mind when developing a sales rep compensation plan:

  • Incent the right things — not all revenue is created equal so consider gross margin, profit, etc when incenting results
  • Make the commission policy easy to understand — money is one of many motivators so make it clear how things work
  • Don’t pay full commission unless quota is attained — quota is the minimum a rep should do and should be readily attainable by the right person
  • Don’t cap commissions — why companies do this is beyond me
  • Always have a timely plan — it’s demoralizing to reps to say the plan is changing but then to not deliver it when the year starts
  • Recognize the stars — provide additional awards, incentives, etc for the top performers
  • Align commission payments with revenue received — once the company gets paid the rep should get paid
  • Strive for plan stability — Constantly changing the comp plan can be demoralizing so try to minimize changes and maintain consistency

Sales rep compensation plans are challenging but by following the keep it simple approach, customer interests, company interests, and sales rep interests can all be aligned.

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