What motivates sales reps? They might care about the company’s overall success and want to see the business grow, but when it comes down to it, they’re motivated by whatever earns them the most money possible. In short, they care about what their commission plan tells them to care about.

Comp managers know this in theory – but in practice, it can be difficult to know how to make a commission plan resonate with the reps it aims to motivate. 

In this article, we’ll examine a few of the basic tenets of commission planning to help you develop and improve your plans in the most effective way possible.

Commission plans tips you’ll learn:

• 1. Your commission plan should be clear and simple
• 2. Your commission plan should be built on data rather than intuition
• 3. Your commission plan should deliver results in real time
• 4. Your commission plan should protect against detrimental sales activities
• 5. Your commission plan should be flexible

Motivate your team with transparent incentive pay

Discover the power of automating commissions with Salesforce Spiff, and easily create incentive programs that scale.

Learn more

1. Your commission plan should be clear and simple

Compensation managers often develop over-complicated commission plans, trying to account for every single activity and micro-goal that a sales rep should strive for. This approach often creates more trouble than it’s worth, confusing sales reps about how they should prioritize responsibilities and what their most urgent goals are.

It’s best to focus on the basics when developing compensation plans. Rather than trying to jam as many details as possible into the plan, start by answering the who, what, where, when, and why of each plan you create or update:

• Who does this plan apply to? All sales reps, individual reps on specific teams, team leads, sales managers? Once you identify who the plan is being created for, review the goals of that role and make sure the plan is in alignment.
• What performance metrics do you need to include in this plan? How do they align with specific sales goals you want your plan to achieve?
• Where is the plan going to be applied? If it’s targeted towards sales reps, does it apply to all sales reps or only reps selling to specific territories?
• When is the plan going into effect? Is this plan the new standard for the sellers it applies to, or is it a temporary plan that seeks to achieve an urgent and time-specific goal? If it’s temporary, what’s the timeline for this plan?
• Why are you implementing this new plan – or, why are you making these changes to an existing plan? Why are your current plans insufficient to accomplish your current goals? It’s important that you can explain the reasoning behind your decisions to all impacted sales reps. 

2. Your commission plan should be built on data rather than intuition 

Data is critical to sales comp planning; it helps you understand past performance and market conditions so you can accurately and competitively create comp plans that motivate reps. Unfortunately, however, many comp managers rely too heavily on guesswork when building plans. When you implement or change a comp plan, make sure the elements you include are backed by historical data. 

For example, imagine you’re designing a new comp plan for the purpose of driving expansion among your existing customers. Your intuition may tell you to include an increased commission rate for upsells during the next pay period. The question is: How significant of an upsell commission rate should you offer?

In this scenario, you’ll want to take a step back and analyze historical sales data related to customer upselling. Look at how you currently reward reps for upsell deals and what results they’ve generated. Study how reps have responded to increased commission rates related to specific deal types in the past. This information will help you determine what commission rate will be the sweet spot between too low (doesn’t motivate reps to upsell) and too high (motivates reps to only upsell and start slacking on their other selling responsibilities). 

Get the latest articles in your inbox.

Sales

Selected

360 Highlights

Selected

C-Suite

Selected

IT

Selected

Commerce

Selected

Marketing

Selected

Service

Selected

Please select at least one newsletter.

Email Enter a valid e-mail address

Select your country United States Afghanistan Albania Algeria American Samoa Andorra Anguilla Antarctica Antigua And Barbuda Argentina Armenia Aruba Australia Austria Azerbaijan Bahamas, The Bahrain Bangladesh Barbados Belarus Belize Belgium Benin Bermuda Bhutan Bolivia Bouvet Is Bosnia and Herzegovina Botswana Brazil British Indian Ocean Territory Brunei Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Cayman Is Central African Republic Chad Chile China Hong Kong Macau Christmas Is Cocos (Keeling) Is Colombia Comoros Cook Islands Costa Rica Cote D'Ivoire (Ivory Coast) Croatia (Hrvatska) Cyprus Czech Republic Democratic Republic of the Congo Denmark Dominica Dominican Republic Djibouti Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Falkland Is (Is Malvinas) Faroe Islands Fiji Islands Finland France French Guiana French Polynesia French Southern Territories F.Y.R.O. Macedonia Gabon Gambia, The Georgia Germany Ghana Gibraltar Greece Greenland Grenada Guadeloupe Guam Guatemala Guinea Guinea-Bissau Guyana Haiti Heard and McDonald Is Honduras Hungary Iceland India Indonesia Ireland Israel Italy Jamaica Japan Jordan Kazakhstan Kenya Kiribati Korea, South Kuwait Kyrgyzstan Laos Latvia Lebanon Lesotho Liberia Liechtenstein Lithuania Luxembourg Madagascar Malawi Malaysia Maldives Mali Malta Marshall Is Mauritania Mauritius Martinique Mayotte Mexico Micronesia Moldova Monaco Mongolia Montserrat Morocco Mozambique Myanmar Namibia Nauru Nepal Netherlands, The Netherlands Antilles New Caledonia New Zealand Nicaragua Niger Nigeria Niue Norway Norfolk Island Northern Mariana Is Oman Pakistan Palau Panama Papua new Guinea Paraguay Peru Philippines Pitcairn Island Poland Portugal Puerto Rico Qatar Republic of the Congo Reunion Romania Russia Rwanda Saint Helena Saint Kitts And Nevis Saint Lucia Saint Pierre and Miquelon Saint Vincent And The Grenadines Samoa San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands Somalia South Africa South Georgia & The S. Sandwich Is Spain Sri Lanka Suriname Svalbard And Jan Mayen Is Swaziland Sweden Switzerland Taiwan Tajikistan Tanzania Thailand Timor-Leste Togo Tokelau Tonga Trinidad And Tobago Tunisia Turkey Turks And Caicos Is Turkmenistan Tuvalu Uganda Ukraine United Arab Emirates United Kingdom United States Minor Outlying Is Uruguay Uzbekistan Vanuatu Vatican City State (Holy See) Venezuela Vietnam Virgin Islands (British) Virgin Islands (US) Wallis And Futuna Islands Western Sahara Yemen Zambia Zimbabwe Select your Country Select your Country

State/province 北海道 – Hokkaido 青森県 – Aomori 岩手県 – Iwate 宮城県 – Miyagi 秋田県 – Akita 山形県 – Yamagata 福島県 – Fukushima 茨城県 – Ibaraki 栃木県 – Tochigi 群馬県 – Gunma 埼玉県 – Saitama 千葉県 – Chiba 東京都 – Tokyo 神奈川県 – Kanagawa 新潟県 – Niigata 富山県 – Toyama 石川県 – Ishikawa 福井県 – Fukui 山梨県 – Yamanashi 長野県 – Nagano 岐阜県 – Gifu 静岡県 – Shizuoka 愛知県 – Aichi 三重県 – Mie 滋賀県 – Shiga 京都府 – Kyoto 大阪府 – Osaka 兵庫県 – Hyogo 奈良県 – Nara 和歌山県 – Wakayama 鳥取県 – Tottori 島根県 – Shimane 岡山県 – Okayama 広島県 – Hiroshima 山口県 – Yamaguchi 徳島県 – Tokushima 香川県 – Kagawa 愛媛県 – Ehime 高知県 – Kochi 福岡県 – Fukuoka 佐賀県 – Saga 長崎県 – Nagasaki 熊本県 – Kumamoto 大分県 – Oita 宮崎県 – Miyazaki 鹿児島県 – Kagoshima 沖縄県 – Okinawa Select a state/province Select a state/province

State/province Alberta British Columbia Manitoba New Brunswick Newfoundland Northwest Territories Nova Scotia Nunavut Ontario Prince Edward Island Quebec Saskatchewan Yukon Select a state/province Select a state/province

State/province Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Select a state/province Select a state/province

Yes, I would like to receive the Salesblazer newsletter as well as marketing emails regarding Salesforce products, services, and events. I can unsubscribe at any time.

I agree to the Privacy Statement and to the handling of my personal information. In particular, I consent to the transfer of my personal information to other countries, including the United States, for the purpose of hosting and processing the information as set forth in the Privacy Statement. Learn More

I understand that these countries may not have the same data protection laws as the country from which I provide my personal information. For more information, click here.

Please read and agree to the Master Subscription Agreement

By registering, you confirm that you agree to the processing of your personal data by Salesforce as described in the Privacy Statement.

Sign up now

Thanks, you’re subscribed!

3. Your commission plan should deliver results in real-time   

You’re implementing or changing commission plans so you can drive certain behaviors. But you’ll struggle to do so if it takes months for sales reps to fully visualize and understand the results of their efforts. It’s important that your reps have access to real-time data related to all of the metrics and subsequent results outlined in your commission plan. 

When you build plans using an automated incentive compensation management platform, you’re able to give reps real-time insights into their plans and the results they’re generating. Rather than wait for a dense spreadsheet, they’ll be able to visualize their plans in intuitive dashboards and see their commission earnings generated in real-time. This will mitigate confusion, increase transparency, and provide ongoing motivation as sales reps continue to hit their targets.

4. Your commission plan should protect against detrimental sales activities

You design a commission plan so you can influence positive sales behaviors, motivating sellers to perform the activities that help the business succeed. Your plan must also do the opposite; it needs to protect the business against sales activities that hurt the company in the long run.

Here’s an example: Let’s say your company offers a subscription-based platform. Your sales reps are bringing in a lot of deals and earning the company a lot of revenue upfront – but over time, it becomes clear that a high percentage of these customers are churning within three months. In other words, they likely were never a good fit for the product.

How do you avoid this scenario without overcomplicating your commission plans? One method is to include a basic three-month clawback clause. If a customer churns within three months, the sales rep who closed the deal must return the commission they earned. This straightforward stipulation will help you motivate sellers to pursue high-quality prospects rather than embrace a detrimental quantity-over-quality selling approach.

5. Your commission plan should be flexible

When you build a commission plan, you’re not creating a final product that you’ll set and forget. A plan that’s effective today can quickly become ineffective when your goals and priorities change – which happens often for most businesses.

As you build a plan, consider whether or not your comp planning process enables you to change details and add or remove elements of the plan. For example, if you’re building a plan with a basic tiered commission structure, what happens if you need to add a new tier later on? Be wary of implementing any plan element that your process won’t enable you to easily change or build upon.

Once again, this strikes at the importance of your commission management platform. If you’re building plans in spreadsheets and tracking commission manually, any change you want to make is going to require hours of work that you may not have the bandwidth for. Leveraging an automated commission platform is the only way to build flexible plans that can adapt and grow alongside your business.

Start with the basics and improve your commission plans over time

Compensation management can seem incredibly complex and intimidating, especially if you have a large and multifaceted sales organization. But it’s critical that you begin with the key elements that make a plan effective – clear expectations, real-time data, and transparency. Once you’ve nailed the basics, you can monitor how your plans perform and add new elements as you gather more data and see more results.  

Launch sophisticated compensation plans fast

Is outdated commissions management hurting your growth? See how to quickly create automated incentive plans that motivate your reps.

Watch the demo