Four ("Must Apply") Principles of Sales Compensation

(originally posted on https://www.growthlineconsulting.com/blog)

You might be doing it wrong, and you definitely have sales reps on your team who think you are doing it wrong.

Sales compensation comes in many shapes and sizes, as there are multiple ways to effectively motivate sales team members to achieve what you (and more importantly they) want. Financial reward is at or near the top of the list of motivating factors for sales team members, and that's likely to remain. Other things like trips and recognition (particularly executive team recognition) are also important motivating factors, but at the end of the day it’s critical that the monetary portion of the compensation plan is on point.

While there are many shapes and sizes of plan structures, there are four principles of a a sales comp plan that I strongly advocate for, regardless of the type, size, or structure of sale.

1. Motivate behavior that is consistent with business goals. In other words, the plan will cause sales reps to act a certain way and achieve certain objectives. When they do achieve those objectives, make sure the outcomes of achieving those objectives align with your business goals. This sounds simple, but it’s very easy to get mis-aligned. 
2. Balance strong performance with consistent performance. Forecasting and scaling your business becomes much easier when there is a constant flow of new business vs. a huge month or quarter followed by a long dead period. It’s not difficult to develop a plan that builds in the consistency factor, without sacrificing performance.
3. Build your plan around a single metric that serves as the “core” metric - whether it’s revenue, bookings, billings, sign-ups, or a metric that’s key to your business, find one and build around it. There can (and should) be other metrics or objectives that influence the plan, but a single metric should be the foundation, and as stated earlier - this should be very aligned with your business objectives.
4. This final one is a bit personal for me, but I’m a proponent of paying sales reps really well at the top end of the performance spectrum. The top 5% or 10% of your sales team are comprised of individuals who drive a huge and disproportionate amount of value to your business, and retaining them is critical. Make it an extremely hard decision for them to even consider popping their head up to look around by rewarding their valuable performance in kind via a rich, uncapped plan.

Does your plan execute on these four principles?