5 considerations for building an effective sales commission structure

When building a productive and effective sales team, few decisions are as important as the sales commission structure. Think about it. A well-designed sales commission structure leads to happy customers, happy sales representatives, and a happy bottom line. But with 69 percent of respondents claiming they use three or more metrics to build the sales compensation structure—modeling and planning can quickly become too complex as a spreadsheet-driven exercise.

Here are five key considerations when it comes to creating a fair sales commission structure.

1. The right blend of salary and commission

No surprise, this is one of the most important elements of your sales commission structure. As we discussed previously, you need to take into account a few factors: culture, goals, and feedback. There are those few organizations where 100 percent commission-based compensation makes sense across all three factors, but it isn’t going to work everywhere. Consider the goals and metrics your sales team are held accountable for and make sure your pay structure is motivating the right behavior.

2. Compensation that includes both individual accomplishments and team or company achievements

As Aberdeen Group explained in their white paper, best-in-class firms were more than twice as likely as the so-called laggards (59 percent vs. 29 percent) to have a compensation system that recognized both individual achievements and team or company accomplishments. If your company’s business objective is to pursue a new industry or geographic expansion, perhaps there is a reward for the overall team’s accomplishments towards that goal.

3. Effective territory planning and quota setting

In our recent webinar, The Art and Science of Sales Quotas, we were joined by Mark Donnolo, managing partner of SalesGlobe. He shared survey data that found when asked the question, “What is the biggest sales compensation challenge at your company today?” 52 percent of respondents said that setting effective quotas was their biggest challenge. Many companies look at out-of-dated data when setting quotas, and this can end up limiting opportunities and sales driven to accurately sell. With a cloud-based planning platform like Anaplan, you can incorporate not only historical data but foresights from predictive analysis to model out ‘what-if’ scenarios and accurately compensation for revenue growth in an product or region.

4. Accurate and aligned performance dashboards

A performance dashboard or scorecard can help both sales representatives and their managers stay on the same page and see both areas for improvement and areas to capitalize on. And well-designed sales dashboards provide a straightforward, visual way to understand the numbers. With Anaplan when a change it made at one level, that change will instantly ripple throughout the models so that you and you team or even worse—executive leadership are never looking at two sets of data—eliminating frustration and increasing trust.

5. Tools that enable your sales force

A sales application that can pull in transaction data in real time and allow reps to update their sales data on-the-fly will help to keep your sales force motivated and engaged. The more time they have for selling, versus the administrative tasks of data input, the happier they’ll be. With Anaplan, the business users are empowered to own, update, and build on the models—IT is no longer a bottleneck. Sales can have confidence and full visibility into the numbers, why they were chosen, and how there were chosen.

Dedicate the time you need to model your sales commission structure. Getting it right the first time can mean greater sales success, and a loyal sales force, over the long haul. Check out Anaplan incentive compensation demo to discover how leading sales teams are optimizing their commission structure to exceed business objectives.

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