Implementing a Sales Compensation Program

by: Mike D’Amico

On June 17th, I presented a webinar on implementing a sales compensation program.

At the end of my presentation, I received a number of great questions so I thought I’d share the answers.

What sort of infrastructure or organization is required to manage a sales comp program?

Larger organizations may have a Sales Administration function, often residing in the Finance department. However, for smaller organizations this may not be feasible. What is more important is to establish clarity around roles, responsibilities, and the processes associated with your sales compensation program. If done properly, you will have a virtual team that manages the program. Typically people within  Sales, Finance and Human Resources each take on various responsibilities to administer an effective program.

How long does it take to fully implement a sales comp plan?

The full process of determining requirements, benchmarking, design, preparing supporting materials/tools/processes then communications and change management typically takes 6 to 8 months. If you pilot the program before a full scale launch, budget for 12 months for implementation. For a smaller organization working without a pilot, you could implement a program as quickly as 4 months if you dedicated the necessary resources and had the right expertise.

What kind of comp programs should be put in place for sales support staff?

Sales support staff play an important part in an effective sales team. The nature of an individual’s role determines the most appropriate compensation structure. If an individual does not have a customer-facing role that influences the buying decision they would not typically be part of a sales compensation plan. However, sales support staff can have a hybrid incentive plan to reflect their role in supporting successful sales outcomes and productive sales reps. The size of their incentive compensation opportunity is typically more aligned to a corporate style program than a highly leveraged sales comp plan. While their incentive opportunity may not be as large, the determinant of their payout should be tied directly to sales focused goals associated with their role and activities. They may be incented around payment collection (DSO), timeliness of getting payouts processed, overall sales team results, etc.

What is role of sales contests and awards/recognization vs. base sales comp program?

Sales contests, special incentives (SPIFFS) and recognition events can all play a meaningful part in incenting and recognizing a successful sales organization. Many high performing organizations will budget for these initiatives outside of their regular sales compensation program.  They can be used to recognize and reward individuals that contributed to a meaningful sale result that are not normally part of a sale compensation program. They can be used to incent a particular focus outside of, or in addition to, the regular sales comp plan – for example, a big push to make the quarterly numbers, or to drive effort on a particular product. Awards and recognition – such as qualifying for the annual ‘president’s club’ trip – are also a different way to incent desired behaviours. Some people are motivated by different things and this may include being recognized as a top performer.

What are your thoughts around grandfathering sales comp plans for isolated products/services while implementing changes elsewhere in the program for new products/services?

Sales compensation plans do not need to be a one-size-fits-all. They should be designed to drive the desired behaviours to execute on your corporate and sales strategy. If there are existing plans that are working well for isolated products or services there may be no reason to change them. The plans being developed for new products may make perfect sense for the new areas but may not be as effective as the existing plans for the legacy products. As long as your program is designed in a way that will support the business plan and incent the behaviours you desire in your sales staff you should be able to have flexibility in the details. However, you will want to be aware of internal equity so that you are not unintentionally incenting your sales staff to abandon one product/service area for another because the sales comp plans are perceived to be richer.

Our sales are based on monthly subscriptions – have you seen monthly sales comp payouts?

I have seen monthly payout programs but these would typically be used for commission plans. A commission plan doesn’t require the forecasting precision that a quota-based comp plan needs for monthly administration. Commission programs are generally fairly straight-forward calculations of either a percentage of the sale or a flat rate amount for each sale – or in your case subscription. This simplicity makes it reasonable to calculate the results and provide a timely payout monthly.

  • Categories


  • HOW CAN WE HELP YOU?
    LET’S GET STARTED

    TALK TO US TODAY