Praxis Blog

Why Is It So Difficult To Get Sales Compensation Right?

Richard Lenahan - Friday, April 06, 2012

We’re now into the second quarter, and despite everyone’s best efforts, your new sales compensation plans still haven’t been rolled out yet.  You did everything right last year:  the development process started early, the design team had all the right stakeholders, weekly meetings were held, and senior executives were briefed at the appropriate times.  Yet, after months of analysis, vetting, consensus-building, and decision-making, sales people still don’t know how they are being paid this year.

Why is it so hard to get this right?

It is so close to your customers and prospects:

The sales compensation plan is the most important thing to your primary interface with your customers and prospects – your salespeople.  Sales compensation plans drive behavior, and if the plan is designed incorrectly, The Law of Unintended Consequences can have disastrous results.

There are so many stakeholders:

The sales compensation program is often central to the enterprise, so people from all over the company are invested in it:

v  Finance/Business:       A key driver of the revenue plan

v  Marketing:                    An integral part of their go-to-market strategies

v  Human Resources:      A primary tool for recruiting and retaining top sales talent

v  Sales:                             The key motivation for your best sales people

It’s a big expense:

For many companies with a direct sales force, the sales compensation line item is one of the largest expenses, often second only to salaries.

The governance is often not clear:

Is it often not clear who ultimately owns the sales compensation program, which can lead to unproductive disputes and conflicts later in the process.

It’s difficult to tell if the comp plans are effective:

Because the sales compensation program is so interconnected with so many parts of the company, it is often difficult to measure its effectiveness.  Do you have the wrong sales compensation plan in place, or are your sales goals unrealistic?  Does a lack of attrition among your sales force mean that your compensation plans are effectively motivating them, or are you just over-paying them?

Praxis Sales Compensation Consulting has years of experience helping companies of all sizes successfully navigate through the process for an effective implementation.  Give us a call for a free assessment!

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Recent Blog Posts....

  1. Who Owns the Sales Compensation Program? Richard Lenahan 29-Jun-2012
  2. Why Is It So Difficult To Get Sales Compensation Right? Richard Lenahan 06-Apr-2012
  3. The Art and Science of Sales Compensation Richard Lenahan 08-Feb-2012

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