Will Your Compensation Plan Drive the Right Behaviors in 2021?

By Mark Donnolo

At the root of every company is a sales team: that group of tenacious souls, who were squeezed in middle seats without upgrades, walking the hallways of major corporations, making outbound calls to semi-qualified prospects, pacing customer reception areas waiting for a chance to have that critical conversation about the customer’s needs, and generally wearing out the soles of their Cole Haans.

Of course, some of that has changed during COVID-19. Zoom meetings have replaced business travel, and you may now be pacing in your living room, having swapped out your Cole Haans for a comfy pair of bunny slippers.

Each year, on average — pandemic or not — sales reps experience eight to ten times more rejection than acceptance from their prospective customers. Yet they persevere – most with continued optimism – in pursuit of the close, the add-on sale, the contract renewal. Most of them are driven by a quest for three things: personal accomplishment, recognition, and compensation.

Even though a lot has changed this year, the sales compensation plan is one of the most significant drivers of performance in the sales organization and represents one of the single largest expenses a company will incur, commonly tens or hundreds of millions of dollars. It’s a thin but vital long-distance line that keeps the daily connection between corporate growth and the rep on the street. It guides and motivates the actions of the sales organization more than any other single factor.

But if the plan’s message isn’t clear or to their liking, sales reps will interpret it in their own financial interest. As a corporate leader, you’ll get what you measure and what you pay for – and it may not always be what you expect.

Perhaps because of its power, sales compensation programs have long been a point of conflict within companies. Everyone has an opinion, and everyone is an expert; yet few agree on the best approach to drive performance toward the company’s objectives. Sales, sales operations, human resources, and finance regularly engage in battles over questions like:

  • Does the plan represent our business objectives?
  • Are our highest paid salespeople actually our top performers?
  • Is the plan too expensive?
  • Can we better motivate our organization to pursue the sales strategy?
  • How can we promote more of a performance-oriented sales culture?
  • Can we make the plan simpler to understand?
  • Can we make the plan easier to administer?
  • Are sales quotas penalizing our best performers?
  • How can we set quotas that better represent the sales potential in our markets?

Too often, these battles lead to sales compensation programs that are compromises between parties, ultimately leading to underperformance in the business. But there is a right way to design an effective sales incentive plan, one that will motivate your team to drive the strategy and grow revenue.

In any economy, organizations need a plan that aligns sellers to strategy. This is even more important today as companies prepare for a “new normal.” Have you articulated your C-level goals around customers, products, and the company’s priorities? Does your sales comp plan reflect those goals today as we emerge from the pandemic and move forward into 2021? Are your sales roles aligned with the organization’s goals? Are management roles well defined? Have you reviewed your inside/outside sales structure to maximize effectiveness? Is your pay mix competitive? Does everyone understand how quotas are set? Are changes to the comp plan communicated adequately?

The Sales Compensation Report Card, from my book, What Your CEO Needs to Know About Sales Compensation, is a great resource to help sales organizations with their compensation plans. Click here to take the test and receive your complimentary Sales Compensation Report Card. As a bonus, when we send you the results, we’ll also include Chapter 1 of What Your CEO Needs to Know About Sales Compensation.