Compensation plans in today’s business world are complicated. Many organizations use compensation to mainly support their desired sales strategy, but you need to incentivize for the growth you want to motivate and not make the plan unachievable.
The recent trend is for compensation plans to be tied to ROI with various pay mix plans. But I believe, for a sales force to understand and track their goals, which in turn motivates and inspires sale levels, a simple compensation plan makes the most long-term economic sense.
A pay mix is commonly associated with a sales strategy that is more focused on establishing strong client relationships and maintaining accounts rather than driving aggressive growth.
Focus on establishing strong client relationships and maintaining accounts rather than driving aggressive growth. This does not necessarily mean your plan is not focused on growth, it means it is less aggressive with payouts on that growth if achieved. To become more aggressive towards growth, consider placing more pay at risk.
If the compensation plan is overly complicated, you may have a sales group questioning the focus and motivation of the plan. I believe your compensation plan should incent behavior.
All plans have to incorporate existing compensation on sales from existing accounts, I believe compensation should be at a higher for new accounts for a limited time of one year. You also have to factor in and compensate for continuous learning and behavior that fit company goals.
The way I like to refer to a good comp plan is like 3 legs of a stool, existing accounts, new accounts at a higher comp percentage, and quarterly goals like implementing CRM data, updating marketing lists, new prospecting in new markets.
Again, a lot goes into the philosophy of compensation and how it will incent behavior, keep a sales force striving to achieve, and not be disengaged by a complicated plan.
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