Update your sales commission plan in 5 easy steps

When’s the last time you sat down to review your company’s sales commission plan? For many, sales compensation gets overlooked for years at a time while other portions of the compensation plan are hammered out.

The truth is, no matter how successful your commission plan has been in the past, if it’s been more than a year (or two) since the last review it’s time for an update.

Revising the sales commission policy might seem daunting because you can’t be sure if the new plan will be successful or if it will “rock the boat” too much. However, it’s important to take this risk and put together a plan in keeping with current industry trends. Otherwise you assume another risk—losing your best sales professionals to a competing firm.

Here’s your five-step plan to new and improved incentives.

  1. Determine sales job roles and skillsets
    One of the first things you need to do is determine the job roles within your organization. Which positions will be part of the new plan and what responsibilities will each role fulfill within each department? Consider any new skills needed to successfully perform these responsibilities. For example, employees may need to learn new sales technology to make the job more efficient.
  2. Pick the type of compensation that matches your goals
    If you want the sales team to work cohesively and not as individuals, for example, you’ll need to reward your employees for results achieved through teamwork. If you want employees to focus on selling more of certain products than others, it makes sense to develop a plan that incentivizes them to focus their efforts on selling those products.  Don’t develop more than three new compensation rewards per year, however, because employees will become overwhelmed.
  3. Determine the cost of generating revenue
    It may sound odd, but the next step in improving your sales compensation is determining the cost of earning future revenues. If each employee made goal, could your company afford the raise in compensation? Also factor in expenses such as training, technology, travel, and coaching of sales pros in your business—any or all of which may be needed to assist your employees to goal. This exercise can help you discover whether your new plan is doable or should be reworked.
  4. Keep the lines of communication open
    Be sure and provide your sales employees with complete information about the new plan, including advance notice as to when the old plan ends and the new one begins. Also make it clear what it will take for the employee to succeed under the revised plan as well as his or her new earning potential.
  5. Motivate the team Now that you’ve created a new sales compensation plan, it’s time to motivate your employees to stick with it. Launch the plan with an attractive incentive bonus based on friendly competition, and keep the momentum going by providing regular sales results.

If it’s time to sit down and create a new sales commission plan, talk with your sales leaders and find out what they would like to achieve under a modified program. This effort will go a long way to the overall success of the plan and the company.


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