Sales Director comp plans should bear a strong relationship to the plans of the individual sales people, but should also have a few key differences:
- Be sure the Director of Sales “wins” when his/her people win. So starting with their compensation plan and aggregating is a good approach for at least one measure.
- Even if the individual contributors have a commission-type mechanic (payout is a percent of what is sold), consider a bonus-type mechanic for the Director job (payout is a target amount for hitting goal, less for less and more for over-goal achievement).
- If your reporting systems support it, you might consider a measure of “contribution margin” for the Director. That would be [sales] – [cost of sales] – [directly controllable sales operating costs]. That measure rewards the Director for making the right tradeoffs in sales resources to get the maximum contribution from the overall sales force.
- Another great idea for sales managers is a bonus based on the number of direct reports who meet or exceed their sales goals for the year. This type measure doesn’t allow riding on the coattails of the over-performers, and encourages good coaching, hiring, and “pruning” of the organization over time.
- The pay mix for the Director of Sales is generally less incentive-rich than that for the individual contributors. So if your individual sales people have 60% of their target total compensation in their base (at midpoint) and 40% in their incentive (at target), that’s a 60/40 mix. In that sort of situation, a Director of Sales might have a 70/30, or even a 75/25 mix.