Sales Compensation Plans: 4 Common Mistakes to Avoid

Sales compensation is the driver behind successful sales organizations. It motivates rep behavior to ensure your company has the resources it needs to reach its goals. However, poorly-designed sales compensation plans can do more harm than good for the success of your sales team. Here are four common sales compensation plan mistakes to avoid and how to fix them.

Mistake #1: Recycling the Same Plan Over and Over

Complacency is an all-too-common mistake in sales. If it’s not broken, don’t fix it, right? That only means you have a plan in place that works, not necessarily the best plan. There’s nothing wrong with repurposing parts of a successful incentive plan, but don’t be afraid to make changes to improve its overall performance. 

The Solution: Keep the Good Plan Elements and Improve

Evaluate your compensation plans as a whole, then break it down on a granular level using analytics to find weaknesses and uncover new opportunities. You want to uncover which incentives were successful and why. Then aim to replicate and improve upon that success in your new plan.

Mistake #2: Making the Plan Too Complicated

Sales reps must understand what's expected of them and what they can gain from their compensation plan. The more complex your incentives become, the more confusion it creates amongst your sales team about what types of deals they should focus on. It also becomes more challenging for your compensation team to calculate and pay out accurately.

The Solution: Focus on Simplicity

Simpler compensation plans make it easier for reps to prioritize deals and know the actions they need to take to succeed. This helps align sales behaviors with company goals so every action reps take is working towards your targets. Xactly Insights data shows that incentive plans with three components are the most effective at driving sales performance.

Mistake #3: Setting Pay Based on Only Your Own Data

Your sales compensation plan needs to drive the right behaviors, but it also must be competitive to attract and retain sellers. Today, we’re in the midst of a mass voluntary exit in the workforce, what many are calling “The Great Resignation.” And maintaining employee happiness is critical.

The Solution: Use Industry Data to Benchmark Incentives

Comparing sales pay data with benchmarked data helps ensure you are paying reps fairly and competitively in your industry. That way, you attract top talent, keep top reps happy, and motivate middle performers to increase performance. It also helps you identify successful incentive structures to improve your compensation strategy. 

Mistake #4: Analyzing Plan Performance Once per Year

Traditionally, sales planning has been an annual event. Today’s fast-changing selling environments have made this obsolete. 75 percent of revenue leaders made changes to their sales plans over the past year, according to the 2021 Xactly State of Global Enterprise Sales Performance survey.

The Solution: Analyze and Adjust Plans as Needed

To achieve growth and profitability, you need to make plan changes with agility. Analyzing your compensation regularly allows you to identify potential issues earlier and make plan changes in real-time. This agility empowers you to maintain high levels of performance and develop resilient revenue streams for your organization.

The solution to all of these mistakes? Automation.

Well-designed sales compensation plans create great sales performance. The stronger your incentives are, the more your team is equipped to succeed. But it’s nearly impossible to execute and avoid compensation mistakes when you manage your compensation manually.

Automated Incentive Compensation Management provides a central resource for all of your compensation and performance data. It enhances your ability to analyze performance, improve your incentive structures, and make plan changes as needed. It also makes it easier for your compensation team to calculate and pay out commissions quickly, reducing reps’ need for shadow accounting.

This ensures you always have the strongest incentives to motivate your team and that they are engaged and focusing on the most profitable deals.