Autumn is the time of year for sales leaders, managers, and CEOs to begin laying the groundwork for next year’s success. Have you considered how your current sales compensation plans impact your team’s motivation and productivity? Now is the ideal moment to evaluate, adjust, and deliver these plans, preferably by December 1st. Doing so can significantly influence your team’s drive to close deals in December and build momentum heading into the next fiscal year.
Sales compensation should be motivating and rewarding for employees. It directly shapes your sales team’s behaviors and priorities. An effective plan incentivizes the right actions and deters the wrong ones.
Consider a common pitfall: salespeople holding back deals to inflate their numbers for the following year. Does your current compensation structure inadvertently reward this practice? If so, you’re unintentionally harming your year-end results.
To counter this, strategically incorporate compensation escalators and cliffs into your plan. Escalators progressively reward increased sales performance throughout the year. Higher performance equals higher commission rates, driving your sales team to push forward continually.
Commission cliffs reset commission rates at the beginning of each year, creating a sense of urgency to close deals before the end of December. Communicating these compensation details clearly by early December ensures your team understands what’s at stake.
Don’t hold your team back!
Another critical compensation consideration is eliminating commission caps. While some organizations cap commissions to control expenses, this practice can backfire dramatically. Caps tell your top-performing salespeople that their exceptional efforts are neither valued nor rewarded appropriately. This demotivates your top talent and encourages them to seek opportunities elsewhere that offer uncapped rewards.
Removing commission caps signals that the organization fully supports and rewards outstanding performance. Have you considered how much growth your company might achieve if artificial constraints didn’t limit your sales team?
When evaluating compensation, look beyond simple cost containment. Consider the true profitability of incentivizing increased sales volume. Once salespeople reach their targets and enter accelerators, each additional dollar earned typically comes at a lower incremental cost to your organization.
Sales transactions earlier in the year have already covered the salesperson’s base salary once they have met their annual quota. In fact, at 100% of quota, the salesperson should have covered all their costs and their share of the overall company’s revenue needs. Thus, every extra sale at escalated commission rates still contributes positively to your overall profitability.
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