Paying for prospect persuasion: Set up effective sales compensation plan

What is converting prospects into customers worth to your business? Your organization might have a phenomenal product, but if no one buys and uses it, its value will stay your little secret. Motivating salespeople to get your goods into customers' hands is essential to the product's success. Properly rewarding your salespeople reinforces and encourages their future successful performance. Read on to learn more about how to set up an effective sales compensation plan.

Basic considerations

The framework for a sales pay plan can be intimidating to HR practitioners, even those experienced in compensation design. A basic understanding of the sales compensation's purpose, however, and the building blocks used to design a plan is well within the reach of most HR pros.

The compensation plan's goal is to support your efforts to attract, retain, and reward the best salespeople who will directly contribute to the organization's profitability. Several principles are important in guiding your plan design. For our purposes here, we'll focus on aligning incentives with different sales roles.

Sales compensation plans typically use a base salary (or fixed pay) and incentive pay:

• Base salary provides the security of a steady income, even if it's a small part of the total pay.
• Incentive pay represents variable pay that changes based on the type of sales and the salesperson's specific role.

The challenge is finding and using the optimal combination of fixed and variable pay to reward and incentivize the salesforce.

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