Sales Compensation Focus, July 2010 – The economy appears to have taken a positive turn and many companies are starting to think about growth: hiring more sales reps, launching a new product, or breaking into a new market segment. One of the first questions that is raised when a company returns to growth mode, especially if there has been significant retrenching, is, “What should we do with our sales compensation plans?”
While it is generally better to pay as close to the selling event as possible, it is not always the case that more frequent payouts are better. All one needs to do is consider the most extreme circumstance (daily incentive payments ?!) to see how you can have too much of a good thing.
Generally speaking it’s a good idea to align the payout frequency with the length of the sales cycle. If sales cycles are under a month, monthly payouts should be considered. If sales cycles are 1 to 3 months…
If you referring to a bonus plan that is paid at year-end and is available broadly across the company to people in leadership and technical roles, then you should know that many technology companies do pay more frequently than once/year.