I recently spoke with Sumeet Shah of Incentivate on the most basic principles of why we practice sales compensation. I shared that there are a few basic reasons that need to be explored in answer to that question:

We use sales compensation because everyone else is doing it.

The first and main reason we exercise sales compensation is because our competitors are doing it. This also requires some thinking, though. While analyzing the competitive environment is an important part of determining how to pay your sales team, you also have to keep in mind that your organization is unique.

There are some cases where incentives don't make sense, and those cases are unique to the organization, its values, and its circumstances.

I've said this before, but it bears repeating: sales compensation design is crafted to meet the needs of an organization for a moment in time in alignment with its culture, the specific outcomes being pursued, and its unique market strategy.

So before deciding on the type of sales plan design to use, we should first decide on whether to use incentives in the first place.

We do sales compensation because we believe people respond to incentives.

Another primary reason we jump into sales compensation is because we believe it is motivational. But again, saying incentives motivate people is an overly generalized statement that doesn't factor in the nuances of how and why incentives work...not to mention the times that they don't.

The fact is, people are driven by a variety of things depending on the goal. Ideally, you want an incentive program that uses extrinsic rewards that support intrinsic motivations to act or follow through on desired behaviors. And determining all of that is an experience unique to each individual organization.

Listen to the podcast for more.

The full conversation dives into even more of the factors you need to consider when shaping your sales compensation plan. You can hear the whole thing below or by visiting the Incentivate channel on YouTube.