1.  The desired market position is consistent with the level of talent and performance requirements of the organization. Most strong sales oriented companies have base salaries that are at or slightly below the market median and variable cash compensation that achieves a 75th percentile of the market.

2.  Base salaries should reflect the level of basic skills and core responsibilities of the position. Actual salaries should be lower or higher depending on the individual’s skills and competencies.

3.  The mix of base salaries to variable (i.e., % of total cash compensation) should reflect the:

  • Level of influence on the sale
  • Size of the sales opportunity
  • Number of customers
  • Complexity of the sale
  • Time to complete the sale

4.  Sales incentives should have only 1 to 3 measures for determining the payout.

5.  Payouts for commission type plans are made on a monthly (57%) or quarterly (29%) basis. Payouts for bonus type plans are made on a quarterly (43%) or annual (50%) basis. * The incentives should be paid out as      frequently as possible without compromising the customer experience and commitment, excessive administrative overhead, or making the payment trivial.

6.  Sales incentive plans may use a variety of mechanisms. The most common methods are:

  • Commission plan where an individual earns $X based on $Y revenues generated.
  • Objectives based plan where the individual earns income through the accomplishment of 3 to 5 objectives; these may be individual, team or business unit goals.
  • Performance Scorecard where the individual earns income through the combination of performance in three to five metrics, that are weighted and a range of performance goals exist.

7.  The plan motivates 60% or more of sales force to demonstrate the desired behaviors that are important to achieving the sales strategy. For example, this could mean focusing on certain products, customers or markets.

8.  There is a detail analysis of the results by person, a competitive assessment of compensation and an internal assessment of the sales force’s perceptions of the meaningfulness of the plan. This review will help determine its level of effectiveness and if any changes may improve it.

Sales Compensation Practices: The 2012-2013 Special Survey Report