We often hear concerns from companies that their business development team lacks motivation or seems focused on the wrong behaviors and priorities. This could be the result of the compensation plan.
Here are four common mistakes companies make when creating or assessing sales compensation plans:
1. Your plan is too complicated
Too many variables in a compensation plan can cause confusion and loss of focus that can lead to poor results. It is better to focus on key elements like meaningful sales goals, performance objectives and clearly defined sales compensation methods that align with the company’s objectives and goals.
2. Goals are too easy or not attainable
The overall goal of your compensation plan is to drive exceptional performance by incentivizing your people to positively impact your bottom line. If goals are too easy, your sales team may not feel challenged to push themselves or it could result in over-compensation. If the goals are not attainable, your sales people can become demotivated to sell and you may lose them to the competition.
3. Poor communication of a new plan or change to current plan
Once created, it is important to have a communication strategy to roll out the new plan. Do not underestimate the impact of ensuring understanding of the goals and getting buy-in. Explain both the components of the compensation plan to the team and how their performance directly impacts the company’s (and their personal) bottom line.
4. You are not re-assessing the current plan
If your company’s objectives and goals have changed, but your plan hasn’t been updated, your sales team could be spending their time and your money barking up the wrong tree. Market focuses change, company strategy change or shift and job definitions evolve. The compensation plan must also change to reflect and support the new drivers and selling roles.
Learn more about the challenge of creating a sales compensation plan on page 25 of the Business Owner Guidebook for Building a Better Company.
