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It’s a New Sales Year. Those Compensation Plans Done Yet?

By now you have your 2010 revenue plan locked in place, your sales team is refreshed and at full strength, and your pipeline is purged of all unqualified opportunities. You are ready to start out 2010 strong, right? Well, maybe not. If your 2010 sales incentive compensation plan has not been implemented you are still sitting at the starting gate.

Compensation plans are often the last component of a new year’s plan to be designed, but arguably they are the most important – right behind a realistic revenue plan. According to the 2009 CSO Insight Sales Compensation study only 52.6% of surveyed B2B sales orgs met or exceeded their quota last year. This statistic illustrates the need to build effective plans that are both motivational and achievable. If quotas and incentive programs are misaligned you risk having unwanted turnover. Unfortunately, turnover from poor compensation plans often comes from the high performing reps can least afford to lose.

Effective compensation programs are both easy and hard to design. They need to balance the sales and revenue needs of the organization and be highly motivational to the individual sales person at the same time. Finding the right balance between fixed and incentive compensation is a good first step in sales plan design. Based on the type and duration of your sale cycle, making sure the sales person is kept whole from a cash flow perspective is important. This is especially true for companies entering new markets where the sales person’s pipeline is in a development stage.

Simple plans are best; who wants sales person spending hours each month trying to make sure they are being paid correctly, their time is better spent pursuing the qualified leads your marketing team is providing them. Finally, make sure sales accelerators drive the intended behavior. If the accelerators start too late for the majority of your top performers they will have little motivational impact. If they start too early they reward mediocre performance and could result in runaway commission costs!

Balance and common sense is the key to a good plan. Need help, we’re always glad to talk.

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