5 Ways to Improve Your Sales Incentive Compensation Plan

September 18, 2015

sales incentive

Forty-five percent of U.S. companies have workforces that don’t understand their compensation plans, according to a recent WorldatWork study. Our executive recruiting and compensation consulting firm has found that this also holds true with companies’ sales incentive compensation plans, despite the fact that sales forces serve a key role in revenue generation. That said, it is imperative to assess the behaviors a company wishes to promote and reward before creating a sales incentive plan that drives engagement and revenue.

Consider implementing these tactics for effective sales incentive compensation:

  • Pay out more often rather than less often – Studies have shown that if you pay out incentives on a more frequent basis, behavior will be reinforced and repeated. Look into shelving your annual bonus program in favor of paying out incentives quarterly or monthly.
  • Do not establish caps – No one, especially high-performing employees, wishes to be restricted from earning more money through incentives. By capping the incentive compensation, there may be a negative subliminal suggestion that an employer is unwilling to share the fruits of success with employees.
  • Involve people in the process – Companies frequently use the ivory tower approach, only engaging sales leaders in plan design. Instead, engage a cross section of employees in the design process to produce idea diversity and employee engagement.
  • Defer a portion of compensation – Many companies are now taking pieces of incentive compensation and placing them into a deferred pool for future payout. This type of program is an excellent retention tool, as long as you provide reasonable vesting and future payout dates.
  • Install corporate citizenship parameters – Place checks and balances in incentive plans. For example, I recommend installing a corporate citizenship provision into plans so no one, including top performers, can bend the rules to his or her own advantage without financial repercussion.

It is imperative to get your employees, especially your sales force, rowing in the same direction. Following these sales incentive compensation best practices will get everyone in the same boat and help drive engagement and revenue.

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About The Author

Jay Meschke is president of CBIZ Talent and Compensation Solutions. He oversees a business unit that provides retained executive search, compensation consulting, HR consulting and career transition services. He is a sought-after subject matter expert on issues related to executive search and talent management. For additional insights, visit the CBIZ blog and follow him on Twitter at @jay_meschke.

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