The Best Sales Incentive Compensation Plan

4 min read · 7 years ago


The best Sales Incentive Compensation Plan helps execute the corporate strategy, motivate the “right” Sales behaviors, and deliver the “right” customer experience. It aligns the corporate strategy and field sales activities to the target market buyer.

Best Incentive Compensation Plan Motivates “Right” Behavior

Motivate the “Right” Behavior

Better organizational alignment delivers better results.

Companies that are better aligned with their customers have 50% more sales reps achieving quota, close 38% more proposals, retain 36% more existing customers, consistently achieve their sales budget, and grow sales 10-30% more than their peers, according to studies by Aberdeen Group, MathMarketing and Sales Management Association.

If you’re waiting until the end of the fiscal year to figure out whether your company’s incentive plan can actually deliver this level of results, you’re probably waiting at least 11 months too long!

Let’s look at what the “best” plan looks like and then determine if you’re on the right track for a successful year.

The Best Plan Improves Organizational Alignment

The best Sales Incentive Plan achieves the goals of three different stake holders: the Sales representatives, Sales Management and Executive management. When all the primary stake holders are aligned to the company strategy and the target market buyers, then it’s a lot easier to get everyone excited and on board with the details of the plan

In the end, it’s all about making the number!  The company’s revenue and profit number.  The function’s sales and expense number.  The sales rep’s quota number.

Within 30 days of a new fiscal year, you should have a good sense of whether you’re off to a good start.

If the roll-out of the plan does not effectively motivate, instill trust, and empower the Sales representatives, you’re off to another rough year.

The Best Incentive Plan Motivates the “Right” Behavior

Hopefully, a lot of the feedback you hear from Sales representatives immediately after the launch of your company’s incentive plan sounds something like this:

  • I know how to maximize my income and my contribution to the company. The CEO briefly shared components of the company’s revenue strategy, the VP Sales shared components of the company’s Sales strategy and a detailed overview of the Sales Incentive Compensation Plan, and the head of Sales Operations clearly explained what to focus on (and what not to focus on) to maximize our income. Wow, great meeting!
  • I know that I will be fully supported in successfully executing the plan. From the CEO down, everyone demonstrated that they wanted us to succeed and they committed on-going active support. It was clear that management wanted to minimize channel conflict, align the sales teams to the customer’s buyer process, and keep us externally focused on the customer purchasing journey. My direct manager immediately convened workshops to help us develop work plans that would allow us to over-achieve our goals. The more money I make, the more money the company makes. A win/win situation, finally!
  • My goals are challenging, but achievable. My goals represent outcomes that I can directly deliver. It’s clear they want me to sell more Product A and less Product B, and, focus more in developing large new logo business and less focus in supporting customer renewals. The quarterly MBOs and bonuses are designed to help me stay focused, motivated and on track throughout the year. The fiscal year just started and I know exactly what I need to focus on!
  • I have confidence in the plan. Management helped me understand everything I needed to know to maximize my performance and my income. By the second week of the fiscal year I already was executing my work plan for Q1 success. The plan document was clear, transparent, and consistent with the information management presented at the rollout. The rules are fair and make sense. There isn’t a lot of fine print to scrutinize, potential situations that need arbitration, or negative surprises.   The administration is straight-forward. I will not have to waste time ensuring that commissions and SPIFs are accurately paid on time.  This is refreshing and exciting!
  • I feel motivated, empowered, fully supported and confident that I will over-achieve my Quota this year! I’m looking forward to the planned quarterly management updates, sales performance training, work plan workshops, new product launches, etc.

There are lots of actions that your Sales VP can take to make the number, however, getting the incentive compensation plan “right” is probably the most important.  A more detailed discussion of a CSO/ VP Sales action plan to achieve quota can be found here.

It’s never too late for your company to make its incentive program more effective. The sooner they start making the needed course corrections, the more likely everyone will make their number.

What are you personally doing today to motivate your company to make its plan more effective?

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This article was syndicated from Business 2 Community: The Best Sales Incentive Compensation Plan

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