Page 169 - HBR's 10 Must Reads - On Sales

HOW TO REALLY MOTIVATE SALESPEOPLE

How to create a sales comp plan CHUNG
Sales compensation plans need to support a company’s strategy; motivate a broad range of performers; be fair and simple to
explain and understand; and result in payouts that are within a company’s budget. Here are the steps sales managers must
take to design a plan that meets those criteria.

Step 2: Balance Step 5: Consider
Step 1: Set the salary and Step 4: Choose additional
pay level incentives Step 3: Design the plan payout periods elements
This is crucial for The propor- Metrics Plan type Payout curve Companies can Many companies
attracting and tion of earnings Most companies Many companies Caps on earnings set quotas and use nonmonetary
retaining talent. that comes still pay sales- supplement limit the pay of bonus structures incentives, such as
from salary and people a com- salary and com- top performers to cover periods contests or recog-
from incentives mission based on missions with and flatten the ranging from a nition programs.
determines the gross revenue, bonuses based on payout curve single week to
riskiness of the although some exceeding quotas (or make it an entire year.
plan. The proper companies pay or reaching other “regressive”); Research shows
balance varies on the basis of goals. accelerators or that shorter
by industry and profitability overachievement payout periods
is often based of sales. commissions help keep low
on the degree of ramp up the pay performers
certainty that a of top perform- motivated and
salesperson’s ers, creating a engaged.
efforts will directly “progressive”
influence sales. structure.

Source: Adapted from The Power of Sales Analytics, by Andris A. Zoltners, Prabhakant Sinha, and Sally E. Lorimer