Sales Compensation Strategies for Motivating Your Sales Team

by | Nov 3, 2022

Sales Compensation Strategies for Motivating Your Sales Team

A sales manager’s job is to motivate each member of the sales team to perform their best. And it isn’t a secret that a good sales compensation program has an enormous role to play in it – by rewarding behaviors that are desirable and fostering a mindset that values high performance.

With a sound sales compensation plan, you can not only retain your top sales representatives but also drive new recruits to perform better. For a sales compensation plan to work, it needs a solid execution framework that takes everything into account, including data and decision workflow management, while being adaptable to requirements of every member of the sales team.

Good sales managers treat each salesperson as a unique individual with different strengths and weaknesses. It would be your job to help them understand and hone their strengths to drive the company as well as their personal career forward with the help of activity and performance data.

While a good sales compensation plan can motivate the entire salesforce to function as one unit, poor compensation plans can lead to poor sales performance and, in some instances, class action lawsuits.

It cannot be overstated that a company has a lot at stake when developing a sales compensation plan. Because of this reason, we are going to dive deeper into the subject and look at effective strategies that can work wonders in motivating sales teams to perform better.

The Role Sales Compensation Plays in Motivating Salesforce

A sales compensation plan essentially involves a set of processes and performance requirements to determine the amount of money each sales representative will receive, typically based on the proportion of base salary, bonuses, commission, benefits, and sales incentives. It outlines how individual representative will be compensated for their performance.

If you want your sales team to perform well, the compensation has to be competitive enough to spark motivation. When there is a lack of motivation, it not only reduces sales but also leads to turnover of salespeople.

Multiple reasons contribute to a lack of motivation in sales staff. For instance, poorly designed sales compensaton plan, ineffective communication, lack of transparency, and feeling unappreciated could all lead to a drop in salesforce engagement.

The quality of your sales compensation plan and level of compensation is usually the deciding factors for top sales professionals to join your team, stay with you for a long-term basis, and deliver top-notch performance.

Hence, it is the job of every sales manager and sales operations teams to constantly evaluate–

  • Is your sales compensation plan transparent and accurate?
  • Is your sales team happy with the current sales compensation plan?

Key Factors to Designing a Motivating Sales Compensation Plan

There are three important factors that every sales operations team must keep in mind to motivate their sales team –

#1 – Accuracy (Compensation Calculation) 

Calculating incentives, especially for products with complex sales cycles, can be cumbersome and time-consuming, and when done incorrectly, it can have a detrimental effect on motivation. Because of this reason, you need to not only choose the right key performance indicators (KPIs) that spark their competitive spirit but also calculate them effectively.

Many organizations rely on Excel spreadsheets for these calculations, but because they are error-prone, it’s more practical to turn towards dedicated sales incentive compensation solutions that reduce errors in calculations significantly.

#2 – Transparency (Throughout the Process) 

Transparency plays a foundational role in building a successful relationship and timely & clear communication is key to it. Providing transparency related to all external and internal sales processes will effectively motivate sales representations by fostering mutual trust and respect. Thus, it should be seen as a core essential of your sales compensation plan.

When sales staff has clarity on what is expected from them, including their performance results, they stay in the loop and can understand how they are contributing or adding value as a whole. By taking the necessary steps to offer transparency, you will not only increase trust and motivation but also drive loyalty in your sales team.

Three strategies that can help to increase transparency in your sales compensation plan include –

  • Lay out clear sales goals for the year to let your sales teams know what you expect from them and communicate it openly and respectfully to the team.
  • Converse with each sales representative individually to discuss their personal goals. Having one-on-one conversations allows them to understand the goals better, clear doubts or concerns, and mutually agree with them.
  • Schedule follow-up meetings regularly to stay up-to-date with all the salespeople and their feelings regarding their compensation. It is also important to provide them avenues to raise issues and concerns whenever required.

As a sales enablement group, your job will be to create trust by keeping your sales team in the loop, which could be by giving them real-time access to relevant and accurate data.

#3 – Flexibility (Variable Adjustments) 

If you want to keep morale high within your sales team, you must emphasize that your sales incentive compensation plan isn’t set in stone. From setting goals to sales compensation reporting, there should be room for making flexible adjustments after reviewing them on a periodic basis.

Having a flexible sales compensation plan helps with –

  • Increasing resilience and reducing errors.
  • Testing different scenarios to identify the best path for the team.
  • Adapting to new situations as and when they arise, whether while entering a new market or undergoing a change in corporate goals.

In order to be truly flexible, you should be able to oversee the personal performance of every sales representative in detail.

A Solid Framework to Design Your Sales Compensation Plan

Step I 

Establish –

  • Purpose
  • First principles (purpose)
  • Right pay for sales staff based on market standards
  • Right pay mix for variable and fixed compensation
Step II

Establish –

  • Right performance measures
  • Priority of each measurement in the overall plan
  • Mechanics connecting performance to rewards
  • Frequency of paying sales reps
  • Right quotas and target
Step III

Execute –

  • Gather accurate data
  • Manage new data relationships
  • Communicate the plan and how it will be implemented
  • Evaluate the plan against set objectives and make changes wherever necessary

Wrapping Up 

  • If you want your sales team to perform, you need to motivate them with a good and actionable sales compensation plan. Fortunately, Aurochs incentive compensation tool is what you need to ditch the spreadsheets and take a practical and strategic approach to motivate sales teams by providing accurate and timely performance reports while channeling their behavior in the right direction.