Assessing your Sales Compensation Plan: 5 Levers That Matter

Chief Revenue Officers assess sales compensation plans on a periodic basis. Depending on the size of the sales team, annual revenue, geographic distribution, the extent of changes needed, and other factors, these assessments can be substantial in duration, scope, and cost. However, a focused approach targeting key levers can streamline the process and deliver effective results. This post outlines five crucial levers to consider when evaluating your sales compensation plan.

1. Aligning Company Strategy and Business Results

The best sales compensation plans are hyper-focused on influencing the specific behaviors required to drive sales objectives. It’s crucial to ensure your sales compensation plan aligns with your company’s strategic goals. For example, If your business strategy is to increase market share, building a commission-heavy sales plan incentivizing new customer acquisition might be appropriate. Which sales activities (i.e. behaviors) are most critical in order to develop and close net new opportunities?

2. People

Are the skills and talents of your sales team aligned with the required behaviors and your specific type of sale (e.g. long sales cycle, buyer level, strategic or transactional, etc.)? If not, a change in the compensation plan alone won’t solve the problem; broader sales leadership solutions, such as the sales talent model and recruitment process, may be necessary.

3. Comprehension 

Do the sales people fully understand the sales compensation plan? Can they fully remember the elements of the plan? A complex or nuanced plan requiring constant re-reading and clarification will likely fail to drive consistent behavior throughout the year. 

There are a few ways to measure “Comprehension” and the next lever, “Excitement”. These measures are valid and worthwhile investments that help ensure that the sales compensation plan is real and actually translates plans and ideas into actions and progress.  

1. Periodic surveys can be useful especially when the questions are relevant and consistent over time. 
2. Focus groups with either a cross section of sales people or a select group of sales people. 
3. 1:1 interviews with sales people. 

Caution: this data will always need to be vetted relative to more empirical sources (CRM activity and conversation tracking) to counter bias and personal agendas. Companies often use third party sales consultants and fractional CROs to facilitate discussion and to collect feedback. The use of a sales consultant or a fractional CRO can produce more accurate data for a number of reasons, including lower perceived risk to the individual sales person and relevant experience.

4. Excitement 

Are your sales people EXCITED about the sales compensation plan? A well-designed sales compensation plan should excite and motivate the sales team, not be perceived as a tool to reduce earnings. Salespeople should understand how the sales compensation plan connects their efforts to sales objectives and overall business results. 

When the team understands and is enthusiastic about the plan, they are more likely to take positive action. The proverb “Water finds its own level” applies here. When the sales team a) understands and b) is excited by the sales compensation plan, favorable action will naturally follow.

5. Platforms and Tracking 

Do you have platforms in place that allow you to automate reporting of the sales activity data required to effectively measure performance against the sales compensation plan? Your CRM should be configured to track key sales activities and sales metrics. Use dashboards to share this information, visualize progress towards targets and identify areas for improvement for your sales team. 

Efficiency will be negatively impacted If there are sales activities tracked outside of the CRM (such as in a Google Sheet or Slack Channel), or not tracked at all.  Similarly, if certain field updates or new custom fields need to be configured in the CRM specific to the new sales compensation plan, it is important to implement these changes prior to launch. 

If third-party data analysis tools are required relative to the elements of the sales compensation plan this could indicate that you have outgrown your CRM. Or, perhaps this relates back to the complexity lever and making sure your tracking systems can handle the complexity of the impending new sales compensation plan prior to launch. 

Assessing your sales compensation plan requires a focused approach that considers these five key levers. That said, the sales compensation assessment process does not have to be resource intensive or expensive. By strictly aligning sales compensation plan design with business strategy, matching skills to the sale, ensuring comprehension and excitement, and implementing effective tracking mechanisms, you can create a plan that drives performance and achieves business objectives. By focusing on these key levers and seeking expert guidance from sales consultants when needed, companies can create sales compensation plans that drive performance and achieve business objectives.

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Fractional Sales Leaders from Treeline can quickly help you assess your sales compensation plan and implement changes that will move the needle! By leveraging Treeline’s services, companies gain access to industry-leading sales expertise that can drive Q1 success and position them for a strong 2025.

For more about Treeline CRO services, please visit https://www.treelineinc.com/sales-recruiting/fractional-cro-service/