5 Tips for Designing Successful Sales Incentive Compensation Plans
Summary
Effective sales incentive compensation plans are crucial for driving future sales performance. Key strategies include: * **Structure Design Choices:** Balance strong vs. weak incentives, individual vs. group incentives, and short vs. long quotas based on team dynamics and sales cycles. * **Understand Employee Motivations:** Tailor incentives to specific roles, reward desired behaviors, and recognize that factors beyond money, like skill acquisition and career advancement, motivate employees, especially younger generations. * **Set Fair Quotas:** Ensure quotas are based on achievable forecasts, account for territory potential, and allow managers flexibility to adjust for significant changes. * **Optimize Metrics:** Select 3-4 key performance metrics that align with business goals, are controllable by sales reps, and provide real-time visibility through commission software. * **Model Plan Changes:** Thoroughly test all components of compensation plans before deployment and throughout their lifecycle using dedicated modeling tools and actual production data to predict effectiveness and impact.