Sales compensation plans go wrong in a number of ways, but here’s a clear indicator that your incentive strategy is off the rails: commissions go up, but profits stay flat.
A broken compensation plan affects more than your bottom line. It can also drive away top sellers, encourage unwanted behavior on sales teams, thwart business strategies, and ultimately damage your reputation among potential customers. Unfortunately, many Sales Operations Leaders are facing challenges like these.
Here are three techniques for reining in a Sales Compensation Plan isn’t serving its purpose:
1) Tie in clear recovery policies to your incentive plan
Without a clear, strong incentive to thoroughly qualify their leads, salespeople can be tempted to sell irresponsibly. If the commission comes too easily and isn’t reclaimed when orders are returned or canceled, you can find yourself compensating reps for shoddy sales. Of course, every commission recovery policy should include a time limit, so your sales team isn’t penalized for factors beyond their control.
2) Include controls that discourage gaming the system
Whatever your sales compensation plan, salespeople naturally look for ways to turn it to their own advantage. This normal and to be expected, so you simply need to adjust your incentive plan accordingly. For example, salespeople are more likely to manipulate sales commission plans that are overly dependent on periodic quotas. Clearly, sales reps working in some markets and along certain sales cycles benefit from thresholds and caps, but if you find your team is delaying sales for whatever reason, build some checks and balances into your incentive plan to encourage closing deals sooner rather than later.
3) Measure more than just profit
A good sales compensation plan doesn’t just motivate your salespeople to close deals; rather, it inspires them to do things that support the company’s overall business strategy. It’s easy for reps to become fixated on short-term gains rather than big-picture success, and a great way to shift their perspective is to tie incentive plans to things like best practices and customer satisfaction.
To see what tools you can use to get your Sales Compensation Plan back on track, try a demo of Obero SPM.