What’s the Best Way to Compensate Your Sales Team?

January 6, 2016 Nicole Klemp


compensate your sales team

In nearly every business, sales leaders are under constant pressure to grow revenues. And the strategy for doing so almost always involves some degree of tweaking compensation and incentives for the sales team. Most businesses consider sales compensation an important aspect of their overall sales and marketing efforts. In fact, in B2B companies, sales force compensation represents the single largest marketing investment; U.S. companies spend about 3 times more on sales compensation than on advertising. So it’s no surprise that business leaders want to be sure they’re creating the most effective compensation plans for motivating their salespeople and increasing overall production and performance.

One size does not fit all

According to research by the Harvard Business Review, some companies are seeing better sales performance by tailoring their compensation plans to the types of performers on their sales teams. Some salespeople are more inherently driven than others, and different types of performers are motivated by different incentives. They say salespeople fall into 3 categories: stars, laggards, and core performers. It’s important for companies to determine which of those categories the majority of their salespeople fall into in order to determine which compensation method(s) is best.

Stars describe a sales team’s top performers, and will generally meet their sales goals no matter what. However, if there is an earnings ceiling imposed, they are likely to slack off after hitting it. Laggards are the lower performers, and will do their best when given extra motivation through bonus incentives or prizes. Core performers — who make up the largest group in most businesses — are often the most overlooked. HBR found that core performers are often motivated by a tiered approach, which gives them the incentive to achieve a higher tier and increase their commission percentages.

Consider the maturity of your company and its place in the market

Writing for the Salesforce blog, Ken Thoreson suggests there are some things you should consider about the state of your business when tailoring a compensation plan for your sales team. For example, new organizations are generally focused on expanding within their existing markets, and would benefit most from offering higher-than-average compensation to attract sales stars, who are better equipped to build a strong customer base in a volatile environment. On the other hand, more mature, market-dominant companies are able to offer lower commissions and/or salaries, as a large percentage of the company’s revenues come from an existing, loyal customer base.

Some companies may find themselves in a transition period, or undergoing a turnaround. In this case, salespeople should be offered flexible compensation plans, and morale- and team-building programs may be beneficial to keeping the sales team happy and satisfied during the transition. Another scenario to consider is if an organization is positioned for a period of high growth. In this case, the organization should develop compensation plans for a shorter amount of time — say 6-month periods. This will allow sales leaders to make adjustments to the plans as the growth rate fluctuates.

Motivate salespeople with gamification

Sales contests are nothing new, but thanks to today’s customizable enterprise technologies, competition can be taken to an entirely new level. Companies that use a CRM like Salesforce have access to numerous gamification apps they can use to energize their sales teams. Gamification motivates salespeople by rewarding them points for specific behaviors — like creating leads, meeting with customers, etc. These points not only motivate the individuals, but create performance metrics that management can monitor. As individuals earn points and complete tasks, they can unlock achievements, which may be designated with a badge or trophy. And many sales teams will take these achievements one step further, by recognizing individual achievements in company meetings and on team leaderboards.

According to Forrester Research, the programmatic use of gamification and supporting technologies provides sales leaders with a fresh set of methods to motivate their teams, influence behaviors, and accelerate sales performance. Gamification also enables salespeople to motivate each other, which can create a more engaged, collaborative team.

Use compensation management software like CallidusCloud for accelerated growth

A great way to take the guesswork out of sales compensation is by deploying a solution like CallidusCloud’s sales incentive compensation management software. The flexible platform automates sales compensation in a cloud-based system with predictive modeling capabilities that integrates with a variety of apps involved in the compensation process.

Companies that use compensation management tools are more likely to outperform other businesses in achieving sales quotas, accelerating top line growth, achieving wider margins, and enhancing performance by connecting core competencies to technology enablers. The increased accuracy in compensation and incentives will create more accountability and clarity among sales teams, and can remove some pain points for sales leadership.



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