Salespeople tend to be driven individuals by default, but there are always ways to motivate them to try harder and hit higher benchmarks. One of the best strategies that businesses use is compensation – by offering lucrative payouts and bonuses for achieving company objectives, organizations can encourage specific actions from salespeople.

That said, designing a sales compensation plan is no easy task. Companies can't? just set dollar amounts to certain products and services and call it a day. There is a specific science behind sales compensation plans, and organizations need to understand all of the details before developing a compensation approach that can expect to work.

"Sales compensation programs serve many purposes," sales expert David Cichelli notes. "First, they align salespeople's efforts with company objectives. Second, they reward sellers for outstanding results while conversely providing limited earnings for poor performers. And, third, they help
keep sales personnel focused on achieving goals."

Sales teams are comprised of multiple different roles, including support workers, income producers and sales reps. Sales reps are the people who actually convert leads into customers and are typically the focal point of compensation plans. Businesses should follow these three steps as they consider how to pay their agents.

1. Select the right measures: Businesses need to decide how they will gauge the performances of sales representatives. Use profit measures that ensure agents are taking action that will benefit the company as a whole.

2. Calculate the schedule: Agents should always know when they are being paid. If they need to hit certain numbers, make sure that much is clear. This gives agents something to work toward and also eliminates confusion from the payment process. When salespeople rely on commissions to pay their bills, they need to know exactly how they are earning their money.

3. Document performance: Finally, companies need to be able to document the performance of their agents. Sales performance management software can assist with this, giving managers accurate data on the activity of their agents.

"Determine when performance periods begin and end," Cichelli adds. "Determine when payouts occur.  If payouts are to occur more frequently than the performance period, then preclude accelerators from becoming effective until the salesperson achieves the performance period goal."

Sales compensation is a science, and by carefully developing payment plans, companies will be better able to achieve the results they desire.