Sales Compensation

Redesigning Sales Compensation Strategy

Performance targets are being raised to reflect increased expectations for growth, but even among tenured sales reps fewer than two-thirds are hitting their goals

Increasing sales compensation is not the answer, however: barely half of sales reps see a clear link between their performance and resulting pay.  Instead, we must redesign sales compensation strategy to motivate sales reps to achieve their objectives.

Improving Perceptions of Sales Compensation

Many organizations continue to use traditional pay incentives to motivate sales reps to meet and exceed goals.

But this strategy is both inefficient and unrealistic: to move a typical sales rep from 95% to 105% of goal using pay only, organizations would need to double their incentive pay, an average cost of more than $22,000 per employee.

The best companies make sales compensation design changes that improve sales rep pay perceptions: the extent to which sales reps believe their pay plan is fair, aligns with their role, and meets risk/reward expectations.

Identifying and implementing the right sales compensation design can improve individual sales rep performance against goal by 11%.

Trends in the Selling Environment

Customers have more options and more buyers vetting each purchase.

Customers engage sellers later in the buying process, which results in weaker client-seller relationships.

Organizations are selling more complex products into increasingly volatile markets.

Implications for Sales Perceptions

Sales reps become more concerned that pay decision making is fair.

Sales reps rely more on their plans to convey how performance will translate into pay.

Sales reps increasingly value the extent to which pay plans can mitigate risk.

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CEB Total Rewards Leadership Council helps members design sales compensation plans that drive individual performance as well as collaboration, and effectively manage plans over time.

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