Companies vary significantly on the structure of their sales organizations, depending on their business model. Understanding the business model is critical to developing sales compensation plans that will drive the goals of the company and excite the entire sales organization to meet or exceed corporate financial targets.
Keep in mind that sales compensation is probably the most important compensation plan in the company. It needs to be clear in its components and transparent in its implementation. Every company should have a sales compensation governance process for developing and managing the sales compensation plan. (See Best Practice #5.)
In constructing a sales compensation plan, begin by determining its key elements. Always include these four components:
Then, make sure it accomplishes the following:
You also have to consider the types of sales distribution available to your company. There are different sales organizational structures you can use to maximize market penetration.
These first two groups will need a compensation plan and they should vary in some aspects:
These next two groups reach markets where it would be too expensive to have a direct sales force, but a manager is needed to give support and direction:
The seven Best Practices here will help you create a successful sales compensation plan.