Each sales transaction has multiple sets of fingerprints on it. This is completely normal and to be expected. A team is required to bring a deal to completion.
Anyone who influenced the transaction should, of course, be compensated for it. But how do you know who actually influenced the transaction? And how do you make sure compensation is fair? After all, some people drive the sale while others support it.
Start with these three steps.
The right sales compensation structure is critical for making the number. A set of questions that can help you think through this starts on page 308 of the annual workbook.
Step 1 – Define the Desired Outcome:
Begin with your go-to-market strategy.
- What are your milestones?
- What metrics are you measuring?
- What are your long-term goals?
Use your answers to determine the desired outcome for your team to focus on. Then you can set a sales compensation plan that signals what is important. This will drive the behaviors the organization needs to meet its sales revenue goals.
Remember, desired outcome doesn’t always equal a transaction.
Are you able to measure the desired outcome? This can be a challenge for many teams. The functional organizations should collaborate to set smart KPIs:
- Sales operations
Now, how do you make sure that you are paying people to achieve the desired outcome? Steps 2 and 3 will get you there.
Step 2 – Understand Who Does What:
A big problem for many organizations is lack of clarity around roles and responsibilities. Do you really know what each person does in the sales process?
Lack of clarity here can lead to a muddled compensation plan.
Clarify roles and contribution to the sales process before you create a compensation plan. Make sure sales roles are clearly defined. Understand the interaction between roles and their peers and customers.
Now it will be easier to know if you’re measuring the right KPIs. You’ll also be able to determine what average/good/poor performance looks like.
Step 3 – Audit the Process and Determine the Right Compensation Plan:
Next, review your current compensation system.
Evaluate each person who received a credit for a transaction. Determine if they actually touched the deal. Did all of these people actually contribute to the desired outcome from step 1?
Put the focus on KPIs. Your goal should be to align KPIs with sales compensation and desired behaviors.
Now you understand how people are driving or supporting the sales process. Determine the right compensation plan to incentivize them.
Transactional compensation is often problematic. It focuses people on maximizing transactional touches. But is transaction your desired outcome for every role?
This compensation plan is really more appropriate for people directly driving a sale. It isn’t well suited for indirect support positions, such as product specialists. Support personnel may not be called in on every deal.
For this compensation plan to work, you need to know they actually touched the deal. If they didn’t, you’re overpaying.
Percent of quota commission:
This plan is the best way to compensate indirect support staff.
Sales enablement roles increase competencies and equip sales. They increase the company’s ability to sell overall. This merits a percentage of quota compensation.
Dig Deeper: We’ve prepared a tool called the Sales Comp Best Practice Guide that serves as a checkpoint to help you carefully consider each element of your sales compensation plan. Use this free tool to get insight into the best practices of world-class sales teams. Download the Sales Compensation Best Practice Guide.
Get in Front of the Problem Now:
Perform these three steps sooner rather than later. It’s easier to handle Compensation Planning problems now versus when you’re growing rapidly and scaling. As a guide to go deeper, download our 10th annual workbook, How to Make Your Number in 2017 and turn to the Compensation Planning phase on pages 308 to 313 of the PDF workbook.