Writing a sales compensation plan

So much attention is paid to the talent of salespeople – those who shine receive continuous praise, and when entire sales teams are successful, the company acknowledges these individuals. However, behind every all-star salesperson, there is at least one unsung hero: The sales compensation plan that helped to motivate and push them to achieve more.

The sales compensation plan is something that every company needs to carefully consider on a regular basis. A well planned program will drive salespeople to hit new targets, while also helping businesses to push specific products and services. The frontline sales manager needs to use this plan as a tool to communicate the current sales strategy and the various goals associated with it.

Elements of the perfect sales compensation plan

As Inc. magazine notes, there are four core elements that every sales compensation plan should account for: Strategy, performance measures, payout formula and governance.

Strategy outlines the business objective that powers the sales compensation plan. It should note the company's goals as a whole, how the sales team can help meet those ends and what salespeople are expected to do to assist these objectives.

Performance measures assign goals to the sales team in particular. This will help identify targets for salespeople and help them better focus on what they are supposed to be doing individually. Performance measures are crucial to ensuring salespeople know precisely how they are being evaluated at any given moment.

Payout formula is perhaps the most important aspect of a sales compensation plan. This spells out what staff members have to gain from successfully completing their end of the bargain. It will establish how they will be paid in terms of straight commission. A good payment standard is one that motivates staff, while also not hindering a company's bottom line.

Finally, governance is useful for settling anything not covered in the sales compensation plan. "Detail how you will resolve questions or conflicts over sales compensation that are not covered in the plan and may arise," Inc. magazine adds.

Companies can learn more about designing sales compensation plans at this year's World at Work conference in Chicago, Illinois. Canidium will also be there as a sponsor, so be sure to stop buy for hourly drawings to win a Kindle Fire.