Sales Compensation Trends
The best sales compensation structures motivate and reward high-performing employees while generating and protecting your revenue. Selecting and implementing that sales compensation structure is critical in attracting and retaining talent. 
Sales is a high turnover position, almost tripling the churn rate of other industries. A talented sales professional’s skills are in high demand, reflecting their potential to contribute directly to the company’s bottom line. A high-performing sales employee likely has an abundance of attractive job offers to choose from.
Turnover can also result when salespeople, even highly skilled ones, lose motivation and effectiveness while facing a long stretch of resistant leads. Salespeople also look for other opportunities when they fail to see a path to advancement within the company. The evidence of these problems is the 35% turnover rate seen annually across sales positions.
Selecting a sales compensation plan that fits your organization’s goals is one way to attract and retain top talent, stemming the tide of turnover. This should result in increased revenue for the company.
Commission-Only Sales Compensation
This traditional model of compensation, where a representative receives pay only when they complete a sale, has seen a major decline. However, positions without a base salary can still be found. This compensation plan is most effective for companies with an established customer base and a tried-and-true sales process. Without those elements, it may be difficult to attract sales professionals with more experience – people looking for more guaranteed security, especially in situations where there are longer sales cycles, seasonality to a business or significant fluctuations in sales.
Benefits
Cost-effective tool for minimizing risk.
The company will not incur personnel expenses unless revenue has been generated.
Attract ambitious self-starters.
Some sales professionals are motivated exclusively by the prospect of generating an abundance of uncapped commissions.
Drawbacks
Unstable finances
Many potential team members with the ability to grow with the company and provide long-term value can’t afford to risk a period of no pay while they learn on the job.
Unstable relationships
When a rep or sales professional is focused exclusively on closing business deals quickly, they may ultimately damage the company’s ability to build a long-term customer relationship.
Hybrid Base-Plus-Commission Compensation
The compensation trend of falling commission-only sales has been matched by the rise of hybrid base-plus-commission plans. This popular method provides financial security to employees by offering a base salary along with a commission structure that incentivizes performance.
There is also similar hybrid plans with salary plus incentives based on specific goals and measures that are not structured using commissions.
Benefits
Financial stability
Employees have a major stressor removed – the question of whether they have money for their home, food, and bills – but still have the motivation to excel in their roles and be rewarded for that performance.
Company investment
A base salary obligates the employee to take part in other company tasks, such as training new team members, or taking part in culture-building activities.
Drawbacks
Determining commission splits and performance measures for the incentive component
Finding the right balance between security and motivation can be tricky. There is no hard and fast rule when it comes to setting a ratio of base pay to anticipated commission.
Trending Sales Compensation Commission Structures
There are several ways commission and incentives can be both calculated and distributed. In fact, sales compensation can include much more than money.
Non-Monetary Incentives - Companies are increasingly recognizing the value of non-monetary rewards for sales professionals and others. Employees are responding to these incentives too. These benefits and more are being offered by some businesses when employees surpass specific goals or expectations.
- Travel incentives.
- Student loan repayment
- Transportation and mileage reimbursement
- Gym membership
- Professional organization membership
- Cell phone allowance
- Enhanced health benefits
- Extra sick, vacation, and personal time off
- Sabbatical
These non-monetary incentives can give owners and executives the flexibility to reward a salesperson with something specifically tuned to that employee’s needs. Personalization of sales compensation is a trend in itself.
Personalized incentives – Companies are increasingly shifting away from a one-size-fits-all compensation plan. This can boost morale by tailoring rewards to individual motivations. In turn, when salespeople see that they can be compensated for bringing unique skills to the workplace, they are encouraged to keep developing those skills, creating a positive feedback loop that fuels itself. Personalization can take many forms.
- Tiered incentives based on seniority can add structure to the team and motivate lower-tier employees with the opportunity to advance.
- Incentive targets can be personalized. One salesperson might have a goal based purely on volume, while another receives compensation for customer retention. For a sales compensation structure like this to work, every benchmark and every incentive must be intrinsically tied to the company’s larger goals.
Sales Performance Incentive Fund (SPIF) - Non-monetary incentives and personalized incentives are both longer-term structures for sales compensation. When your company has a short-term goal – sales of a seasonal product, for example – SPIFs or sales contests can provide a fresh and exciting opportunity for team members to receive additional sales compensation.
This tool should be used sparingly. Contests can lose their motivating power if a new one is introduced constantly, and the short-term goal setting runs the risk of distracting from the company’s larger goals.
There once was a time when commission-only sales compensation ruled the land, but attracting and retaining today’s top performers often requires leaders to provide stability in addition to incentives. With the right candidate, this investment in talent can have a massive reward for the business. Contact the Overture Group now to connect with the talent that will elevate your business.