The Coaching Effect Blog

How to Think About Sales Compensation Plans

Posted by Bill Eckstrom

January 19, 2011


Posted by Bill Eckstrom, President, EcSELL Institute

Compensation programming and compensation plans seems to be on everybody's mind and for good reason.  Developing, refining and redoing compensation plans, put simply, is tricky.  Here are a few best practices I learned while in Senior Sales Management roles. 

            *Research shows that cash is still king as a reward for top performance with 89% listing it as the #1 reward, regardless of age and tenure. 

            *For hunters (those that obtain new business), keep base low and commissions high.  Put as much income at risk as your market will bear and do not limit their income.  The true hunters in your organization will gravitate towards this plan and the farmers will weed themselves out.  My experience tells me to weight the plan disproportionately to those who exceed goal by increasing commissions when producers hit their number.

            *If your business is built on recurring revenue, don't be afraid to bonus sales reps on the book of business historically created by that sales rep.  A few times I've heard negative comments on this pay structure with words such as "fat cats don't hunt", but keep in mind the challenge is not with the structure, but how and when you pay.  Do not pay a bonus or commission on an existing book of business unless new sales goals are met.  This can lead to greater sales rep retention and an increased ownership mentality of your accounts.  This also forces your reps to take a longer term view of their respective territory.

            *Sounds simple, but make sure your incentives are aligned with your objectives.  For example, if your objective is to increase the penetration of existing accounts, make sure your comp plan pays a disproportionate amount to have reps do this.  If you need to change your comp program to accomplish this, change it!  More than 50% of businesses researched change their compensation plans annually, and they need to change if their method of attaining objectives changes.  Also should note, none of my above best practices assumes you pay more money, it is just reallocated to allow top producers a greater ability to earn.

Outside of sales compensation, take into account other recognitions and rewards that are pleasing and motivational (too much to cover in a blog) to your sales team. 


Compensation design and planning is a topic at our upcoming 6 Pillars of Sales Productivity Workshop on April 6, 2011 in Scottsdale, AZ.  Our Pillar Partner, Mark Valitus, Sales Effectiveness and Rewards Division Head of Towers Watson, will be conducting a workshop session titled "How to design a compensation plan that keeps sales reps motivated"

Consider joining us or sending your front-line sales management team to the 6 Pillars of Sales Productivity Workshop because your ability to attract new talent and hold on to top performers is the key to sustained growth. Establishing a well designed compensation program is a important element in employee retention.

6 Pillars of Sales Productivity worksshop


Mark Valitus was also a featured instructor at our September 2010 monthly Sales Management Webinar series.  If you would like a copy of the webinar, leave a comment with your email or request a copy to  Mark also provided the webinar audience with sample compensation plans. We are happy to share these sample compensation plans with you!

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