Q: I sell advertising for a local newspaper. In our sales compensation plan, we compete with our revenue numbers from the previous year, and approximately 6% is added to the previous year’s revenue number. That becomes your goal for that particular month. We get a salary plus commission and have a
stair-step commission that starts at 80% of our goal.
The problem is there is no motivation between the salespeople due to the fact that we are competing with numbers from the year before. When we have talked to management about it, they
say that if we changed the pay plan, we would have to lower salaries. In most months our company keeps approximately 92% to 96% of the total revenue I bring in. I’d like to know your thoughts on this kind of sales compensation plan.
A: I
suspect that this kind of question lurks in the back of the minds of many salespeople — “Is my sales compensation plan fair?”
Seeing Both Sides of Compensation
I’ve been on both sides of this issue. As a salesperson, I’ve worked under a number of different compensation plans. In every sales position I had, my compensation plan was changed at least once.
As a consultant, helping companies refine their compensation plan is a regular part of my practice. Almost never does a week go by that I’m not involved in a compensation plan project somewhere.
Criteria for Evaluation
Over the years, I’ve developed some criteria for evaluating a compensation plan. Here’s one of them: A good compensation plan should be a win-win plan. That means, good for the salesperson and good for the company.
