Why Do We Do Sales Compensation?

It may seem like a strange question, but its answer is at the root of everything I do. Sales compensation is more than just the standard way to pay salespeople. Done right, a good compensation design can provide fuel and motivation for your team, improving their results, and resulting in higher retention rates—all of which helps your organization grow and reach its goals. 

On the other hand, without careful thought and upkeep, a compensation plan can stagnate, or worse, become a detriment to success. To fully understand why this is the case, I like to explain the three reasons at the root of why we do sales compensation in the first place. 

1. Because everyone else is doing it. Believe it or not, there’s some validity to this in that the role you’re compensating has market standards, and ideally you want to match those standards as closely as possible. Of course, it’s also important to recognize that your business has a life cycle, and how you approach sales is very much dependent on your position in that cycle. So, there may be times when the way everyone else is doing sales compensation isn’t right for your team at a certain point in time. 
2. Because we believe it works. The psychology behind sales compensation is that rewards motivate behavior. The problem with that way of thinking is that it requires a more holistic, human-centric view of rewards—in other words, creating the behaviors you want isn’t as simple as dangling money in front of people and telling them what to do. Successful compensation finds a balance between intrinsic and extrinsic rewards, keeping the team both motivated and well taken care of. 
3. Because it creates alignment and trust. Your compensation plan is a powerful management tool. Not only does it allow you to align the behaviors of your sales team with the goals of the organization, it also gives you the opportunity to build trust with your team. Compensation is the first and most important indicator that an organization is going to fulfill its promises to its employees, which is why careful design, consistent application, and regular review is essential to the success of the team. 

Once you understand what a huge driver for success your comp plan is, you can begin to identify dozens of points of vulnerability (and opportunity) within your plan design and how to optimize it to empower your team. 

That’s what I do. I work with sales leaders to build, flesh out, revise, or improve then compensation plans to maximize the success of their sales teams. Ready to talk about your team? Schedule a quick discovery call and let’s see what opportunities we can uncover.