Question and answer format
Some sales comp plans pay for activities instead of, or in addition to, paying for results. Is this a good idea?
In designing a sales comp plan, we strongly recommend paying for financially measurable results (as opposed to activities). Sales compensation, to be really motivating, generally involves significant cash and upside — and you want to be sure that those payouts are rewarding sales people for results that more than cover the money to be paid.
With that said, other great measures besides just sales/bookings/revenue are often used, generally they have to do with the quality of the sales dollar. Some sales dollars may be more valuable to your company than others — like sales of more profitable products or services, or sales of strategically important new products, or sales into an important targeted industry segment.
Also, sales over goal are generally more lucrative for the sales person than those below goal. And consistent sales performance is often valued over sporadic sales performance. These are just a few of many alternatives to just paying on sales. Picking the right one is all about aligning the rewards with what is most important to the success of the business.
Donya Rose, CSCP, is Managing Principal of The Cygnal Group. She is a recognized expert in sales compensation plan design, regularly speaking at conferences and writing published articles. She serves clients from F500 to growth-stage businesses, and advises WorldatWork on sales compensation hot topics and best practices.