Reframing Ideas about the Role of Sales Leadership

Whether you’re already in the process of rolling out new compensation plans or are just getting started, I wanted to provide you with a list of resources to make sure that the rollout of yours is as successful as possible. There’s a lot to consider, and it’s challenging to get everything right, but by reviewing the following best practices and considerations, you should be able to spot any areas of your plan that are either missing or need shoring up. Review: What do you need to communicate to your team about comp design? We’re starting with the assumption that you already have your plan design in place for 2026 or your next fiscal period. If you don’t and are interested in learning more about designing or updating a compensation plan, I recommend you start with my simple guide to sales compensation . Otherwise, let’s dive in. Because it’s so essential that sales team members understand how to achieve their goals and what winning looks like, communication is probably the most important part of rolling out any changes or new plans. Before you start sending out emails, I recommend having an outline of any changes you’re making and how you want the messaging delivered to your sales population. Here are some key factors to review: Job Content What elements of each role are changing? Are there any changes to the hierarchy in the organization? Did any core responsibilities or expectations of performance change? As an example, did the emphasis of account management shift to new business acquisition? Things like this, depending on the extremity of the change, should impact design as well as be best communicated in a very personal medium for those roles and individuals impacted. Compensation Components What updates or additions are you making to things like bonus plans, incentive plans, and your total rewards package? How do you anticipate those changes affecting your team? Obviously, if you’re offering raises and additional bonuses, you don’t have to worry too much about fallout, but for other adjustments, you’ll need to prepare for questions and objections. Positive news may be well received in a group setting, but be careful with the assumptions of what may be taken positively or negatively. Objectives, Targets, and Territories What changes are you making in terms of how your team members do their jobs? For example, are the quotas and objectives changing at all? What about territories, account assignments, or the way market opportunities are defined? For any changes in this category, it’s essential to explain why the business decisions are being made. Be sure to relay the basis for the adjustments, and it is best to be transparent where possible. Ideally, business modifications of significance are supported by data-backed rationale and analysis, so that they can be shared with the team. If there are performance reasons for some of these changes, it’s best to address affected team members privately and individually. Additional Compensation Design Review Resources: Download my 6 Steps to Developing a Variable Pay Program to review best practices in establishing a plan, as well as items to double-check before your rollout. Visit my Best Practices for Job Content blog post for a list of questions you should be able to answer before communicating changes with your team. Also consider a resource to help spot errors in your job design . Get some guidance on reviewing targets and objectives with these 5 keys to setting realistic goals . Have a listen to my conversation on the Haverin’ About podcast , where I talk about revisiting your comp plan to make it as effective as possible. Your Comp Communication Plan Once you have a good handle on what you need to communicate and to whom, it’s time to develop your communication plan and set up talking points, audience expectations, and the method of engagement. For some, it seems like you should just be able to throw some meetings on a calendar and wing it, but change—even good change—will always be a challenge for people to adapt to. Taking the time to think through how you’ll communicate will help build trust in your team. Group Meetings vs. 1:1 Meetings Sensitive information or changes that affect each individual uniquely should be handled privately and one-on-one. This should also be done before any release of information on a mass scale. Examples of this type of communication may include: Job changes or promotions; these conversations should be had and finalized prior to any group announcements. Internal equity adjustments; if you’re making changes based on equity and fairness that may directly impact some employees more than others, it’s a good idea to have some courtesy conversations prior to making any announcements. Compensation changes; in the event of quota adjustments or changes to incentive plans where some employees will be more dramatically affected than others, communicating with them privately either before or right after any major announcements will help them adjust more smoothly. Take the time to acknowledge that there is a known difference in their experience. Prior to putting out meeting invites for these conversations, it might be a good idea, depending on your communication culture, to send out an email to the group reminding them that it’s the beginning of the year, you’ll be rolling out the new comp plan, and you’ll be reaching out to have some personal conversations before the big, group meeting. If you have an existing sales incentive plan review annual process, they should know and expect change, and it makes the process a little easier. If the historical experience for your sales population has been haphazard, then they will likely be on edge. If there are trusted employees who can help champion a message to the team, you may want to bring them into the review process earlier in the change management cycle. It just depends on your team size, magnitude of change, and cultural proclivities. By putting thought into the impact of change on each of your team members and planning your communication strategy accordingly, you’re showing your team that they are respected; as a result, you’re improving trust, which plays a massive part in the long-term success of your organization. Additional Comp Communication Resources: This article on preparing for pay transparency is a good resource for thinking through the process of determining any internal equity issues on your team. DEI may be dead, but if you’re still striving to achieve fairness in your organization, this post has some good food for thought. Read through part 1 , part 2 , and part 3 of my series on trust to get some ideas for your communication plan. Download the free Finding Fairness checklist for a comprehensive list of factors to consider in order to make your rollout as smooth as possible. Keep Evolving Your Compensation Design There’s a reason my job is more than full-time: compensation is complex and ever evolving. It’s like a quantum physics problem—once you feel you’ve finally figured out the right formula, it stops being the right formula. That’s why I always remind the leaders that I advise that the compensation plan is designed for a specific purpose and strategy for a specific moment in time. As you move further away from that moment in time, you’ll need to adjust the incentives to meet the needs of the new reality. And that goes on and on forever.  But once a year or once a fiscal period (depending on the length of your sales cycle), evaluation is a good cadence for reviewing your plan, and it’s okay to take a moment after rollout to appreciate that it’s finished before diving back in. Hopefully, with the resources in this article, your rollout will go smoothly, and the team’s experience will be positive – even in the event of significant change.

In the process of implementing sales compensation plan changes, one of the first steps is assessing what already exists . That involves benchmarking, which I wrote about in a previous post. Benchmarking is all about collecting data and comparing yourself to best practice standards as well as external competitive sources. Now, alignment, on the other hand, is how your comp plan supports your internal goals and is congruent with your culture and mission, and because those things are always evolving, it’s important to regularly assess whether the sales incentive program is doing what it needs to in your organization. What’s Changed? Since the last time you created or updated your sales compensation plan, chances are that things are different from before. Even if you feel your organization hasn’t changed at all (which isn’t exactly a good thing since, ideally, you’re always growing), the world your organization lives in has. As part of the assessment phase of implementing a sales comp plan or update, it takes some time to realign. Internal Changes Company Goals: What are your organization’s current goals in terms of revenue, profitability, customer experience, community impact, vision, or any other important factor? How has that goal evolved since the last time you evaluated your compensation plan? Knowing these things will help you make sure your sales strategy and compensation are synchronized towards reaching the next level. Company Growth: What stage in the lifecycle of an organization is your company in? Typically recognized stages of an organization’s lifecycle are startup, growth, decline, and renewal . In each of these varying stages of maturity, you’ll naturally have different objectives and strategies for reaching those goals. How has your organization progressed within its life cycle stage since your last compensation plan update? Has it moved from one phase into another? Have different product or service offerings evolved into new stages? Company Culture: This goes along with company growth, because as you grow, your organization will experience turnover, new hires, changes in leadership, etc. With those changes comes the need to realign with culture. What are your organization’s current values, purpose, and objectives? Much of this involves people and management interactions, as well as human resources priorities. How have those changed since you last updated your compensation plan? How might those changes affect how you approach a new comp plan? External Changes Economy : Changes in the economy at local, state, and national levels can affect everything from the viability of your product or service to how you define sales territories. Assess your market opportunity and sales territory assignments individually for economic changes that might affect how your coverage model, as well as how you compensate the sales team, is affected. Government and Politics: What has changed in terms of the regulatory environment for your product or service? What about pay equity and pay transparency laws? Or tariffs? In the US, when government leadership shifts and changes every couple of years, you can be guaranteed one thing: change is inevitable. Assess any legal implications that may have affected your pay levels or pay mix, pricing strategy, and the impacts on the sales process from those regulatory requirements. They may impact the go-to-market strategy and thereby influence some organizational goals. Environment: No one likes the c-word, but I’d be remiss if I didn’t reference how COVID taught us that the best-laid plans can be wiped off the map by one environmental action. Additionally, there are logistical and delivery implications from natural disasters, national turmoil, wars, and more. So, it’s important to regularly assess your organization as it relates to the world around it. What has changed since you last updated your compensation program? How have those changes affected things like your territories, the viability of your product, how you sell your product, etc.? Current Sales Strategy: Does it Support Today’s Organization? Once you’ve evaluated the internal and external changes, it’s time to look at your sales strategy. What measures did you use to define success originally? Do you believe that has shifted? If possible, analyze the effectiveness of the sales execution and strategy since the last time you assessed. Has it remained effective? Has it declined? Compare your strategy to the current organizational goals and atmosphere, and if necessary, identify any changes that need to be made, hold a strategy session with stakeholders, and realign your strategy to support your current goals. Current Compensation Design: Does it Support Sales Strategy? Once you know how your sales team plans to take your product or service to the customer, it’s time to realign your comp plan to support and incentivize the behaviors needed to achieve that sales strategy. You’ll need to recognize what has worked so far as well as what is no longer working. How operationally ready is the organization for execution? You’ll have to be honest with yourself here, as the compensation should vary depending on where the offering is positioned relative to your competitors. You’ll need to check in with the marketplace to make sure your organization is positioned well to succeed. But before jumping into that, there’s one more step in the assessment process—gathering feedback. I’ll address that in my next post.

As your organization grows and evolves, making a practice of regularly benchmarking your comp plan can help you keep your sales team motivated and growing. Benchmarking is a process that involves gathering data and comparing it to your industry to evaluate how market competitive your comp plan is and whether you need to make any immediate adjustments or phase in changes to align with current or long-term objectives. This review cycle also provides the opportunity to assess alignment with business strategy and refresh/educate leadership on best practices for sales compensation. Identifying Industry Competitors Depending on your cadence for evaluating your sales comp plan—and if you haven’t developed a cadence, believe me, you’re not alone—a lot may have changed since you last compared yourself to your competitors. Your organization has evolved. Your go-to-market strategy may have shifted. So, the businesses you compared yourself to last time may not still be your competitors. Here are a few things to evaluate when identifying and selecting competitors for comparison: The maturity of your organization The size of your organization (number of sellers or revenue) Your industry and/or business segment Your territory (geographies or account-type specific) Your sales strategy and process It doesn’t do a lot of good to compare your comp plan to a software sales company if you are working for a healthcare services company. Likewise, if you’re a small, regional business, you can’t expect to compare your plan to that of a large, multinational organization. So, make sure to do your research to find your true market competitors. And it is important to keep in mind that certain portfolio products and/or selling functions may have different competitive populations. Doing this correctly means understanding your business in great detail. Information to Gather You’ll need to gather quite a few details about your comp plan in order to give it a fair assessment. It may be difficult during this process to want to change things as you go, because you’ll likely see places where you can make improvements. Just try to remember that this part of the process is about gathering information about the state of your comp plan here and now. Things you’ll need to look for: Compensation: Document the base salaries, commission rates, bonus programs, and pay mixes for each role on your team (internal and survey data). You’ll also want to account for historical payouts under the various aspects of the plans or contests. This is where we review pay distribution and alignment to market movements. Performance metrics and outcomes: Document the ways in which you gauge success. These may include things like sales quota attainment, revenue attrition (churn), customer acquisition costs, product mix, etc. This is where we test the relationship between performance outcomes and pay levels. Territory: Assess the size of your sales territory and any trends you’ve followed over the years, as well as the way you have the territory allocated to sales team members. You also want to try to take an objective view of the health of the market opportunity and the territory’s revenue outcomes (independent of the people in the job). This is where we assess appropriateness (test for incongruence) of the territory size and scope to the job. Sales Activities: Document the selling process, the sales cycle length, average deal size, and conversion or win rates. Each organization’s approach to measuring the health of the sales team will vary – your metrics may differ. You want to get an understanding of whether adherence to your assumptions (of sales team activities) aligns with the best outcomes of the sellers. Internal equity: Chart your sales teams on a pay vs. performance graphic to identify any outliers where you may need to analyze the reasons behind any discrepancies. This is a simple visual that helps provide a starting point to guide potential actions or areas of focus. All of this data will be your basis for comparing your compensation program to its intended outcomes as well as your competition. What’s Next Once you’ve identified your competitors, gathered your information, and made your comparisons, don’t jump straight into making changes. Instead, make note of areas where you hope to improve your compensation plan in light of organizational investments and the market dynamics (competitive landscape). You’ll need that information along with other pieces of information — feedback from the sales employees, feedback from customers, and a confirmation of alignment with organizational strategy and philosophies.  I’ll address these remaining aspects in upcoming posts. In the meantime, if you’re looking for a quick breakdown of the components of a sales compensation plan, be sure to check out my book, Starting Simple: Sales Compensation.

Over the summer, I'm going to be spending time putting together a roadmap for implementing sales compensation, so I figured blogging my way through it would be a good way to provide helpful information while I organize this information. The natural place to start is with the assessment of an existing compensation plan. And here's something you're going to hear from me a lot—it's important to understand that this process is cyclical and ongoing. You'll never just one-and-done a sales comp plan. In fact, when you present plan documents to members of your sales team, there should be a clear start indicating when the new plan will supersede any previous compensation agreement and an end date for when you plan on evaluating and updating the plan. So, for starters, let's outline the main metrics utilized to define success and determine the direction in which the sales compensation program should evolve. 6 Comp Plan Metrics Alignment with organizational financial goals. This one's pretty clear since the primary purpose of a sales team is to drive financial success. However, there are many ways a comp plan can either fall out of alignment with organizational goals or stagnate and begin to lose effectiveness. Some things to look for: Changes in revenue: Maybe five years ago, the sales team hit targets easily, but their numbers have steadily fallen off. Or maybe it's the other way around, and they're exceeding targets too easily. Any changes could indicate a need to realign compensation with a new goal. Cost analysis of the sales comp plan: Look at the sustainability of your comp plan. How is the ROI? Does the cost of base pay and variable pay fit within the budget? This could be a pay mix issue or an accelerator issue. Your organization's growth and maturity: The way a young business compensates its sales team is very different from that of an established business with a well-known brand. Where is your organization in its maturity? Do you have a sales team that will take you to the next level? Or are you still operating with the same team that got you here? In my experience, this presents itself most often by the size of the commission rate and the appropriateness for the changing organization. Sales Team Performance This is another obvious one. Again, you're not just looking at today's results but rather assessing any changes that have happened since the last time you updated your compensation plan. Some questions you should be asking: How is the team collectively performing in terms of hitting quotas? What about individually? Any significant shifts in performance levels? What relationship does performance have to the assigned quotas? Do you see uniformity or a bell-shaped distribution? Are there any notable gaps in performance between individuals or groups of salespeople? What sales activities/inputs or market dynamics have changed since the last review? Sales Team Satisfaction This metric eventually comes down to a retention factor. Obviously, if you're feeling pain from frequent turnover, then you already know you have a problem. However, future-casting retention issues are important to prevent problems in the first place. For this metric, you'll want to not only look over the results of your sales team's success evaluation but also seek individual feedback, whether in the form of surveys, performance reviews, or just casual conversations. We can get into different scenarios that may arise during this evaluation at a later time, but for now, it's enough to know that just because you don't see anything concerning on the surface doesn't mean that what's happening beneath that surface is necessarily setting you up for success in the future. Ask the people with boots on the ground how they're feeling about things like their career growth, compensation, ability to meet quotas, work-life balance, benefits, and other essential factors. Also, keep in mind that as the organization grows, so will the sales team, and many of their roles will need to evolve. Some attrition is good because not everyone who helped you during the early phases of growth is the right person for the next phase of growth. But it is better to know and anticipate that rather than be surprised by that reality. Ultimately, managing through turnover means keeping strong relationships with your team and nurturing their talents so they can evolve with you. Customer Satisfaction Gauging customer satisfaction can give you insights into the cultural alignment of your sales team with the organization. While you want to provide as much space for a salesperson to shape their own success as possible, you also want to make sure their tactics and relationship-building skills are aligned with organizational values. Sales can and should be done with integrity, and customer satisfaction surveys are a good way to ascertain whether this is happening. Generally, the financial way of gauging customer satisfaction is whether they will continue to buy from the organization. While that is true, it also depends on the unknown future to determine the actions of the present. Account management processes, relationship maps, engagement tracking, and other intentional customer-centric actions should be considered when determining the efficacy of the program. This measure will indicate if there are any potential side effects with overly aggressive (think Wells Fargo) or "soft" plans that pay out richly even though the customer hasn't seen anyone in five years. Internal Equity Under the sales team performance metric, I mentioned looking out for any strange performance gaps. In general, your team should be operating predictably along a pay vs. performance curve (ideally, we want to see a very clear linear relationship). Of course, there will be front runners and those who are in last place, but if you notice anyone falling massively behind or any clustering of groups of individuals outside the normal distribution, it's time to assess your internal equity and look for things like: Equitable opportunity sizing Territory allocation reviews Quota optimization Has something changed in your territories, market, or product portfolio assignments to cause some of your team to struggle to hit performance expectations? Has something else fallen out of alignment? Dig into the underlying causes. Unconscious Bias Confirmation Bias Optimism Bias Chart each sales team member along with their demographic statistics (years of experience, education, time in the job, gender, ethnicity, etc.) and see if you notice any patterns or pockets or treatment that need to be adjusted. This can address any of the aspects of perceived fairness within the sales organization, especially if there hasn't been much organizational change for a while. The purpose of this is to question whether things need to be looked at differently and adjust accordingly. Competitive Comparison Analysis When the sales role was established, you likely checked the market for the value of the base and overall pay ranges, as well as the pay mix of the role. Or maybe you didn't, and you went with what you could afford at the time. As you're entering the time of evolving your comp plan, you should revisit that market and see what has changed. Has there been any job scope creep? If jobs have shifted, you will want to document and redefine the roles to get a better perspective on how they compare to the market. Has the labor market level of compensation for your roles changed since your last comp plan update? Where does your organization's size and complexity compare to when you started? Larger organizations pay differently than smaller organizations (and they source talent differently) How do these findings align with your organization's compensation philosophy and company values? The primary consideration here is to refresh your pay data regularly. So, when evaluating the program, be sure to collect the applicable competitive vantage point to aid in the assessment process. Knowing What to Change The chances of everything still being perfect and not requiring any adjustment are next to zero. There are simply too many factors at play to realistically hope you won't have to update and evolve your plan in any way whatsoever. By collecting these factors, you can genuinely assess the magnitude of change that ought to occur to keep up with the desired organizational trajectory and transformation.

In a previous post, I wrote about how to use compensation to keep a team engaged throughout a long sales cycle , or any sales process that extends longer than a year. That article begs the question—what do you do for a short sales cycle? Needless to say, there are a completely different set of situations, but one thing remains true: there’s no one-size-fits-all approach. What is a “short” sales cycle? In this case, I’m talking about any business that has a heavily transactional sales process. For example, selling internet service or solar power access over the phone are both transactional offerings. The sales teams in this instance are going for quantity and not spending a lot of time nurturing the contacts. The goal is to drum up interest quickly and get to a client or prospective commitment in the same conversation as the initial introduction. This is a volume-based sales role with an expectation of daily and weekly performance levels. Sales roles pursuing these types of transactions are often contracted and paid on commission (if not solely, in large part). They can also be employees who are exclusively focused on engagement and outreach for other roles to pursue the follow-up. Inside Sales or Business Development Representatives (BDRs) can have this out-bound emphasis centered around the number of out-bound conversations occurring daily with expectations of 150 or more dials per day. Recognize that this doesn’t all have to be done over the phone. Think of the cell-phone or cable providers at the big-box stores, the kiosks at events, or the vendor shows where the in-person sales process may only last a few minutes from start to finish. Compensation Considerations for Short Sales Cycles One thing that remains the same, whether you’re compensating for a long-term or short sales cycle, is that best practice is to connect the reward as closely as possible to the desired behavior. For heavily transactional businesses, this could even mean offering cash payouts on a daily or weekly basis. Beyond commission payouts, there are also some other factors to consider, including: Company culture and reputation : When the focus is on closing sales as quickly as possible, culture and mission can get lost in the shuffle. The reputation that is conveyed in short order with customers still matters. When working with contracted salespeople, it’s important to provide some cultural onboarding to make sure they’re aligned with your organization’s values and processes—even though they are in contact with customers for only a short period of time, they are still ambassadors of your brand. In our current world of social media, nothing lasts quite as long as a poor experience between client-facing roles and prospective customers. Visibility and ownership of the sales process : A downside of a fast-paced sales environment and outsourcing your sales is the lack of control and immediate oversight the company may have in the sales process. You don’t want a Wells Fargo situation , so it’s important to make sure you’re incentivizing your salespeople in a way that promotes ethical sales practices (as well as built-in processes and quality controls). Aggressive sales incentives are the norm: People working in these environments expect heavy or even 100% commission-based compensation plans. Just make sure to map out the cost of sale and the varying points of performance that the company can sustain. Keep in mind if you have to implement a threshold (minimum level of performance before incentive pay), and if your financial model can afford accelerated commission rates or if caps/maximum scenarios will apply. All of this depends on your organization’s goals and the ability to deliver on the products/services being offered.  Unlike a long sales cycle where the sales process and milestones of progress are emphasized more heavily than the outcome, incentives for transactional sales will be more focused on rewarding the financial outcomes. Given the pay is focused on the aggressive and speedy objectives, the organization will have to put more internal emphasis on things like culture and company values, training, processes and procedures, and quality controls to keep sales delivering on the types of goals your organization desires. To learn more about creating a sales comp plan that attracts, retains, and motivates talent, sign up for my biweekly newsletter.

If you’ve spent any time on this blog at all, you’ll know my belief that there’s no one-size-fits-all approach to sales compensation. Creating a comp plan that is motivating and fulfilling for your sales team while at the same time achieving your organizational goals takes consideration of many factors, including the goals of the company, the place of the organization in its life cycle, the culture, the behaviors you want to incentivize, etc. However, one of the most important factors in how you design your sales compensation program is the length of your sales cycle. For organizations with very long sales cycles, comp design isn’t as easy as offering a percentage commission on final closing. It will require a bit more thoughtfulness. What is a “long” sales cycle? For the purpose of this article, I’m defining a long sales cycle as any average sales process that extends beyond one year. And I’m not including the lead generation or initial discovery stages into that average – as we all know, it can sometimes take years to make progress with an organization or contacts before engagement in the initial phases of the selling process. Products or solutions in engineering, development, and construction services, government sales, and health system business development are good examples of offerings that take a long time to come to fruition. However, the key thing to take away from identifying roles with long sales cycle length is the experience of the salesperson - the longer the wait time between beginning the sales process and deal closure, the more challenging it is to connect the actions with the reward. How to Provide Compensation During Long Sales Cycles The goal when you have a long sales cycle, is to compress long-term actions into short-term incentives. Obviously, this is complicated by the fact that your organization doesn’t receive a payout until after the close of the deal—and depending on the contract, it may still be very far off from then. Some contracts come with payment terms where the full monetary benefit of the transaction isn’t seen for years. So, how do you keep your salesperson engaged during the long process? What does a reward program look like when it is five years from the time the salesperson starts to engage with the customer and the company receives initial payments? Here are a couple of things to consider. • Pay Mix: The split between base pay compensation and variable pay compensation should be commensurate with the risk (and corresponding reward) that the individual takes on in the role – meaning that generally, existing client sales carries less risk than new business sales. The size and scope of the job (e.g., Field Sales vs. Inside Sales) also come into play with the final equation. Generally, the split on pay for new business sits at around 50/50 to 60/40 (base to variable). Existing Client sales generally start around 60/40 and may go to 75/25 depending on the specifics of the role. Base Salary: With a long sales cycle, there needs to be financial coverage while they’re doing the work of moving a sale forward. It also means making sure their compensation doesn’t rely solely on the close of a sale—because the win rate is rarely 100%. Enterprise salespeople have very high base pay. And for good reason. Ideally, we want the sales incentives to be the star attraction, but too much pay at risk can prompt desperation (and potentially other side effects) rather than motivation and engagement. Creating Milestones: During long sales cycles, there are usually milestone moments or phases in the deal progression that increase the likelihood of the transaction getting to contract. One way to design a short-term incentive program is to identify these important milestones and build financial rewards associated with deal progression. If that isn’t feasible, putting more emphasis on recognition and praise at each of these milestones is considerably beneficial to morale during the long slog towards the deal win. Pay Curve: Thresholds and Accelerators are important components of the way variable pay is delivered. Much of this is related to the accuracy of the target (quota) and performance management as well. With the greater risk of these long-term transactions, the upside potential should be commensurate with the postponement of short-term incentives. The most common accelerators are in the 2x to 3x (times) base rate of pay. Ultimately, the performance levels for long-term transactions need to be modeled for the best fit and affordability specific to your organization’s financial sustainability. In short, you have to think about rewarding the process more than the outcome in order to improve the retention and motivation of your sales team. To learn more about the many complexities and nuances of creating a sales comp plan that attracts, retains, and motivates talent, sign up for my biweekly newsletter .

Over the past few weeks, we’ve delved into six crucial aspects of best practices in sales compensation: culture, financial due diligence, job content, pay mix, objectives, and plan mechanics. Each of these elements plays a pivotal role in shaping an effective and motivating compensation plan. Today, we turn our attention to another key component—timing. Defining Performance Period and Payout Timing There are two key aspects of compensation timing that affect how effective your compensation plan is at helping your organization reach its goals. These are: Performance Period : The timeframe over which sales performance is measured in the compensation plan—monthly, quarterly, annually, or per deal. Payout timing: The timeframe when a salesperson receives incentive earnings associated with their level of performance. While these concepts are distinct, they work together to influence sales behavior, business cash flow, and overall organizational success. Aligning Performance Period and Payout Timing with Organizational Objectives A well-structured performance period and payout schedule will reinforce your organization’s goals. For example, if you’re focused on rapid sales cycles and high transaction volume, you’ll probably use a shorter performance period and frequent payout timing to keep things moving along. On the other hand, if you’re prioritizing long-term account growth, large enterprise deals, or strategic selling, you’ll probably want to utilize longer periods (quarterly or annually) to encourage sustained effort and deeper customer relationships. Motivating Sales Teams with the Right Timing Salespeople are naturally driven by immediate, tangible rewards. If the gap between effort and payout is too long, enthusiasm may decline as the connection between work and reward weakens. On the flip side, overly frequent payouts—such as daily or weekly—could lead to transactional thinking rather than strategic selling. This is especially true when there are more frequent pay periods with very small amounts of pay. So before setting your performance period and cadence for payout, it’s essential to ask yourself what kind of behavior you’re trying to reward in your salesperson, as well as the sales function required to execute on your specific market and strategy. For long sales cycles where frequent payout timing simply doesn’t make sense, you’ll need to balance that by making sure your salesperson is aligned with organizational goals and that the salesperson is able to achieve meaningful levels of performance (as well as payout amounts) within that performance period. Best Practices for Performance Period & Payout Timing Choosing the right combination of performance period and payout timing is a strategic decision that shapes sales behavior and business outcomes. When well-designed, this timing structure maintains motivation, supports financial sustainability, and aligns sales incentives with broader company goals. A few best practices prevail: Align the payout to as close to the performance event (deal closing or otherwise) as possible, conditional on company affordability/sustainability Ensure that the performance period selected is closely aligned with the average sales cycle length. Generally, if there is a very short sales cycle, then a short performance period with quick pay is expected. That does scale up to very long sales cycles and longer performance periods with lesser payout frequency. Most organizations are somewhere in between. Be sure to recognize that it is specific to the sales role and not the company as a whole.

In a way, we’ve already talked a lot about several components of sales incentive plan mechanics. We’ve covered the importance of culture , fundamental financial model ing, establishing job content , determining pay mix , and setting objectives . The next step will bring it all together. Some Important Sales Compensation Vocabulary We’ve previously described, at length, the two primary types of sales comp models (bonus plans and commission rate plans) as well as how to determine which plan best supports different sales roles. But there are a few other terms that are important to know when developing the underlying plan mechanics. The following list comes straight from my book Starting Simple: Sales Compensation . If you want a full but easy-to-understand breakdown of sales compensation, that book is the place to start. Accelerator--An increase in the rate of pay that occurs at a certain level of performance. Generally, this starts after the achievement of 100% of the target performance objective. Deal Cap--The maximum amount of pay on any single transaction Leverage--The sales incentive that would be paid out for performance between the target and the point of excellence. It is represented as a multiple of the target incentive Pay Curve--The slope of the line of the rate of pay throughout all levels of performance. Think of performance as the x-axis and payout as the y-axis. The pay curve represents the relationship between the two. In a fixed-rate plan, this is a straight line, representing a fixed rate of pay for every unit of measured performance (activity completed, dollar of revenue acquired, or percentage point of margin sold, etc.) Plan Cap--Maximum amount of pay under the construct of the plan Point of Excellence--The point on the pay curve that represents the 90th percentile of salespersons’ performance levels (should be greater than 100% of performance achievement) Rate of Pay--The amount of pay per unit of measurement. This encompasses the relationship between performance and payout at any point along the pay curve. Target--A point on the pay curve that represents 100% payout and 100% performance or (100%, 100%) Target Incentive--The sales incentive amount paid for achieving 100% of sales performance objectives Threshold--The point at which pay for performance starts. The threshold point should sit somewhere between 0% and 100% performance levels. It can be zero, which essentially means there is no threshold. Zero--The first point on the pay curve, represented by (0%,0%) for zero level of payout and zero level of performance Best Practices for Plan Mechanics A well-structured sales compensation plan aligns with your business objectives while keeping your team motivated. You need to balance risk and reward, ensuring that pay mix, thresholds, and accelerators drive the right behaviors. To evaluate whether your plan is driving the right behaviors, map your sales team’s performance along the pay curve—identifying where top, mid-level, and low performers fall. If most reps cluster near the threshold, the plan may not be motivating enough, while a heavy concentration at the high end could indicate overly generous payouts. A well-balanced distribution should show a clear progression, with incentives effectively encouraging continuous improvement and rewarding top achievers appropriately. Caps are controversial, and while they can help control costs, they can also discourage high performers. Accelerators, on the other hand, can be a powerful tool to motivate salespeople to exceed expectations. The key is to strike a balance—rewarding overachievement without creating unsustainable payout structures. Finally, sales compensation plans should evolve with business needs. In a future post, I’ll be talking about the importance of a regular review cadence for maintaining performance and fairness. When done right, plan mechanics create a system that doesn’t just pay salespeople but actively inspires them to excel.