I know, lame title, but I couldn’t resist. ManageSmarter.com offers up this article – Compensation Complexity Hinders Sales – regarding current compensation plans. Here are some numbers they quote within the article (my editing):
Only 41% of sales leaders were satisfied with their current compensation plans (down from 59% two years prior), and only 46% believed their plans were promoting the correct behaviors for sales success.
Nearly half (46%) of sales force leaders believe their sales compensation programs have become more complex since 2006.
I always found the compensation plans to be more “complex” when I wasn’t at quota. Successful selling definitely alleviates many problems.
But there is this:
The survey points out that many companies are making strides toward more effective compensation plans. Among the productive steps forward are companies using three or fewer measures of performance (73%), conducting a plan review at least annually (77%) and changing metrics less often than before (58%).
Those are 3 excellent points regarding sales compensation plans. Companies that shift the commission structure around mid-term (weekly, monthly, quarterly, etc.) are generally demotivating their sales team. Consistency is the best policy here. Try to change it only at preset intervals (annually).
Measuring too much can also be a demotivator. Simple, straight-forward commission plans work best. We are proponents of providing commission based on gross margin in as many situations as possible. This approach keeps the salesperson honest when it comes to discounting. If they discount, they lose money themselves – a very good structure for money-driven salespeople.