Sales compensation plans are supposed to drive the right behaviors and outcomes for a business. But too often, they do the opposite. Instead of motivating salespeople and aligning their efforts with company goals, many comp plans create confusion, frustration, and unintended consequences.
Here are some of the biggest problems with sales compensation plans:
1. Incentivizing Revenue but Not Profit
Many comp plans reward salespeople for closing deals but don’t take profitability into account. This can lead to excessive discounting or pushing deals that don’t make financial sense for the business. A good sales comp plan should ensure that reps are incentivized for revenue and profit.
2. Difficult to Understand or Interpret
If your sales team struggles to understand how they get paid, your plan is too complicated. Complex formulas and too many variables create uncertainty—and uncertainty impacts motivation. A well-designed plan should be simple and transparent.
3. Difficult to Administer
Some comp plans are so complex that they require spreadsheets, manual tracking, or extensive back-office work just to calculate commissions. If your finance or HR team dreads every payroll cycle because of comp plan confusion, it’s time for a redesign.
4. Misunderstandings About Payments and Timing
When salespeople don’t know when or how much they’ll be paid—or if there are disputes about commission or bonus calculations—it erodes trust. A good sales comp plan should clearly define payment schedules, thresholds, and adjustments so there are no surprises.
5. Conflicts Between Goals and Incentives
Comp plans should reinforce company goals, not undermine them. If salespeople are incentivized to push one product when leadership wants them focused on another, or if they’re rewarded for closing deals that hurt customer retention, the plan is working against the business.
6. Covering Too Many Things
Some companies try to cram every possible goal into a sales comp plan. I’ve seen plans with over ten different metrics! When salespeople are expected to optimize for too many competing objectives, they either get overwhelmed or focus on the easiest-to-reach target, ignoring the rest.
7. Demotivating Salespeople
A poorly designed comp plan can have the opposite of its intended effect. If quotas are unrealistic or goals constantly change, salespeople will disengage. A great comp plan should motivate, not frustrate.
8. Paying Salespeople as Hired Hands, Instead of Owners
If you want salespeople to act like owners—thinking strategically, building strong relationships, and taking responsibility for long-term success—you need a comp plan that rewards that behavior. Paying them like hourly workers or focusing too much on short-term transactions won’t get you the results you need.
How to Build a Better Sales Compensation Plan
Fixing a bad sales comp plan isn’t easy, but it can be done. Here’s what a well-designed plan should include:
- Clear alignment with business goals – Ensure that incentives drive the right outcomes, including profitability and long-term growth.
- Simplicity and transparency – Salespeople, at a glance, should understand how they get paid.
- Competitive pay structure – To attract top sales talent, your plan needs to be compelling and competitive in the market.
- Fairness and motivation – Reps should feel that their hard work will pay off and that they have a path to higher earnings.
- The right balance of short- and long-term incentives – Mix commissions, bonuses, and performance-based incentives to drive sustained success.
Need Help Designing a New Sales Comp Plan?
If you want to build a compensation plan that drives the right sales outcomes, I can help.
For $5,000, I’ll work with you to:
- Analyze your current sales comp plan
- Define the goals and objectives for your new plan
- Design a new plan that aligns incentives with business success
- Develop a rollout strategy for the new comp plan
I’ve designed and improved many sales compensation plans for my clients and former employers. I know what works and can help you develop a plan that motivates your people and delivers more of the results you’re looking for.
If you’re interested, please contact me at don.maher@maherrecruiting.com or 650-862-0688 and let’s discuss how we can build a sales compensation plan that truly works for you.