When it comes to sales, incentives are crucial – they keep representatives motivated and striving to bring in more revenue. Clearly noted incentive programs and compensation plans are critical to maintaining motivation and production, while poorly designed initiatives can result in wasted time as representatives enact their own strategies for tracking sales.

"Incentives are typically implemented with the goal of focusing attention on specific desired results," Compensation BLR explains. "They allow an organization to more closely tie pay to work and results by providing  'at risk' compensation as part of the total compensation package. This can also allow organizations to improve how competitive their total compensation package is without raising base salaries."

So what type of incentive compensation plan works best? That largely depends on your company, your sales team and the products and services you offer to prospects.

Short-term incentives are best for immediate one-time sales. For example, a company that sells consumable items such as printer toner and office supplies may want to consider short-term cash awards based on performance and the ability to meet goals.

On the other end of the spectrum, long-term incentives are used to influence results over a broader duration of time – typically, more than a year. This compensation approach is typically used only for business unit leaders as a means to reward hitting various business goals.

Individual incentive plans also have some benefits. These can be used to motivate specific people or teams to accomplish various goals or other metrics. If sales teams are split between different product lines, individual incentive plans are useful for motivating the section on a specific line if sales are lagging or a new product is launched.

"You need to be able to track it, you need to be able to measure what the individual is doing, and it has to be done in a way that is consistent with good management practices," advised Paul Dorf, managing director of Compensation Resources. "You have to, obviously, have the ability as a company to track the performance."

Incentive compensation management is one of the leading problems many companies deal with on a regular basis. By knowing your options and business goals, you can better set compensation plans for your sales team.