CEOs don’t need to understand the details of the sales comp plans, but they do need to make sure that a few things are working correctly. Here’s a check-list for what you should be able to demonstrate to your CEO in your next plan review/approval meeting:
- The plans are simple and easy to understand. You can explain them to a high schooler who isn’t math-inclined, and they understand them.
- The sales leaders believe the plans are right, and know how to use them to help manage and motivate their team.
- The amount of at-risk pay increases with increasing ability to influence individual measurable sales results. And those with less direct influence over results have less risk and upside in their plans.
- All incentive measures are objective and financial, except for those used in sales roles with very long sales cycles (market development, huge contracts…) .
- If you ask a sales person what they need to do to really make money on your plan, their answer is the same thing you actually want them doing.
- The cost of compensation works in your business model. Over a multi-year period, comp cost per person goes up with the labor market (3% or so on average across the team) while sales volume per person goes up faster (5-25%, depending on the stage of the business). This is because the sales leaders are adding to the selling capacity of each person through great tools, smart organization, leveraging good marketing, the right coverage model and market strategy.