The cost of sales compensation

Compensation is the strongest motivator for encouraging representatives to close new deals and retain their top buyers. However, it seems that many sales performance management officials are struggling to keep wages at sustainable levels. According to Selling Power, American businesses spend more than $800 on sales compensation every year, which is roughly three times the amount spent on advertising. 

The news source speculates that payrolls continue to increase because businesses can't determine if the compensation plans are effective. Academic research only provides a small glimpse into how a company operates for a short period of time. While data can be extrapolated and trends can be predicted, there are few ways to ensure that the compensation plan should remain static. Experiential design is anecdotal evidence that only focuses on past wages and doesn't take into account future changes. 

Businesses must design sustainable compensation plans that satisfy sales representatives without hurting revenue. The wage scale should include sales incentives and long-term objectives so that the company doesn't have to constantly adapt its strategy. 

Perfecting the formula
Inc. Magazine notes that the payout formula is critical for a compensation plan. Agents must know how much they can earn and the frequency with which they'll be paid for an initiative to be effective. Additionally, companies must determine if they'll use regular wages or commissions as the primary form of payment. 

The ideal plan is a combination of both, and businesses can decide which feature they'd rather use more heavily. For instance, a company that wants to motivate representatives to find new clients should offer incentives for lead generation and closing deals. The commissions will make up the majority of an agent's income, while the regular wage is kept to a minimum. Vendors that use this plan must pick a payment schedule for monetary rewards, such as weekly, monthly or quarterly payouts. 

Adapting to changes
There are always forces beyond a business' control. Adapting to trends and market shifts is important for incentive compensation management. Wages must be adjusted for factors like inflation, revenue, consumer buying habits and employee demand. Businesses that struggle to change their payments will likely frustrate staff members who want larger paychecks. 

Sales is a dynamic field, especially in terms of compensation. Keeping payroll to manageable levels should be a priority for every company. However, slashing wages and incentives can hurt workplace satisfaction, so managers must exercise caution when changing wage scales.