MaRS Library Implementing and evaluating sales compensation plans
When creating sales compensation plans, once your startup has completed the design phase, it is time to focus on the employees who will participate in the plans. As with any program, the communication aspects can make or break you.
The implementation of sales compensation plans requires attention to detail at all levels, including the documentation and training that you provide.
To complete the process of establishing your sales program, incorporate an evaluation process that is thorough and includes all members of your sales team.
Implementing sales compensation plans
- A copy of the sales compensation plan, which should include the design elements of the plan and the individual’s job description
- The terms and conditions of the plan, which should outline all of the “rules of engagement,” including what happens when employees transfer to a new role or leave the company, and how to handle house accounts, territory or account changes
- The individual sales contract, which should explain sales quotas and objectives, as well as formula calculations for the incentives
Clearly communicate your sales compensation plans
Communicate the plan at both a team and individual level. At the team level, review and highlight the overall design of the plan. At the individual level, review and explain the specifics of each sales contract and secure signatures.
Evaluate your sales compensation plans—at least once a year
At a minimum, your startup should evaluate its compensation plan every year (and possibly more often, given the nimble environment of a startup) to make sure it continues to work as desired. Your goal is to ensure all parties—the customer, the company and the employee—are getting the value they expect and that the plan continues to evolve with your business strategy.
How to evaluate a sales compensation plan
To evaluate a sales compensation plan:
- Assess the achievements and payouts under the existing plan against your desired business results
- Review and assess the impact of changes to business goals and strategies
- Review costs and productivity both from a product and customer perspective. Consider developing metrics to calculate:
- Sales productivity
- Customer service
- Your return on compensation investment (ROI)
- Review employee performance to ensure the plan is understood and is driving the right behaviours
- Check your turnover rates
- Revise the sales plan as necessary
For more information on sales compensation plans, see: