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Restructure Your Sales Compensation Model for Sustainable Growth

Numerous organizations are analyzing and restructuring their existing compensation models to meet current business goals and employee expectations. While solely commission-based structures may have worked in the past, hybrid and performance-based pay that encourages revenue growth and tactical behaviors is the key to today’s corporate sustainability.
 
Companies have adopted analytics and metrics to measure productivity against desired outcomes, using compensation as a driving force. Our guest blog offers insights on how to ‘Restructure your sales compensation model for sustainable growth,’ and how you can transform your sales team’s pay model to increase team motivation, equity, and success.
 
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Restructure Your Sales Compensation Model

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Comparing Sales Compensation Structures

Corporations often have a limited view of compensation, with outdated plans that are frequently inflexible and non-transparent, overlooking the evolving professional landscape. As the workforce becomes more diverse and distributed, you must blend traditional models with newer, more popular methods.
 
Commission-Based Models

Some entities issue commission-based pay alone. However, it often leads to income fluctuations, high financial risk for employees, difficulty hiring and retaining talent, administrative challenges, and an adverse effect on workplace culture.
 
Studies suggest that monetary incentives, in addition to base pay keep workers more motivated to achieve workplace goals and may also boost their loyalty to the employer. Incorporating commission structures alongside a set salary or other bonuses provides security and a greater incentive to be productive.

Salary-Plus-Bonus Models

Salary-plus-bonus models are excellent options, especially when you have remote team members. It gives people something to work toward for a financial boost. You might issue performance, incentives, or reward-type bonuses, such as the following:

• Signing and retention payment
• Profit sharing
• Referral bonus
• Stock options
• Holiday bonus
• Annual bonus
• Discretionary and non-discretionary bonuses

Deciding factors for bonus amounts are often based on profitability, individual performance, and seniority. For example, with profit sharing, brands might set aside 2% of a 10% profit margin for employee bonuses.

A solid cash flow strategy is crucial before handing out payments, however. Always ensure long-term stability through consistent cash generation when issuing any financial extras. You always want to see healthy revenue without worrying about your bottom line. 

Team-Based Incentives

Business leaders may provide team-based incentives to encourage collaboration that achieves results. This approach can boost cooperation, communication, and problem-solving. However, you must be mindful that not everyone on a sales team may contribute equal work, and it can prove challenging to hold individuals accountable.

Consider investing in collaboration tools to foster greater teamwork and enhance sales success, making incentives more attainable through hard work. For instance, some applications enable team members to mark project completion statuses, ensuring they remain organized, while cloud-based solutions facilitate input from multiple people on a single document. Many of these are also accessible through various devices.

Key Principles for a Modern, Sustainable Sales Compensation Model

The restructuring of a sales compensation model for sustainable growth must align with your long-term goals. You should reward sales techniques and outputs that cultivate enduring value, such as championing client loyalty and supporting corporate expansion. Additional key principles for a sufficient sales pay structure include:

• Integrating non-revenue benchmarks, such as customer satisfaction and retention.
• Achieving short-term impacts while building lasting relationships.
• Boosting team collaboration through shared incentives.
• Promoting ethical sales practices.
• Clearly communicating and training employees on the compensation model.

Transparency and equitable pay are also essential to building employee trust and motivation. According to a 2024 Gartner survey, 72% of job applicants are more likely to apply for a role if the listing includes the salary. Consider also stating potential monetary opportunities for them to increase their income.

In a separate study, 71% of respondents felt satisfied when their employers offered complete internal compensation transparency. Some states even require it by law.

How to Restructure Your Sales Compensation Model 

Successfully transforming your sales compensation model begins with a comprehensive assessment of your existing plan, helping to pinpoint areas for improvement. Meet with stakeholders to garner input and practical insights that enable sound decision-making.

Your organization must align compensation objectives with its overarching goals. From there, you can develop a hybrid or tiered structure that encourages optimal performance and productivity, driven by employee motivation and engagement.

Test the new model, measure the key performance indicators — sales growth, profitability, and client satisfaction and retention — and make any necessary adjustments. Adaptation is not a one-time occurrence. You must review the plan and make changes as needs evolve.

Changes to how your workforce gets paid could cause contention, so you must determine if you are preparing the sales teams properly. The National Association of Sales Professionals recommends scoring your enterprise’s readiness from one to 10 in the following questions:

1. How much of a change is the impending compensation structure? Is it a minor or major difference from what currently exists?

2. When was the last time you changed the compensation model?

3. How well does the workplace cope with change? 

4. How committed is the sales team management to driving the change?

Smart Compensation for Long-Term Success

There is no greater time than the present to restructure your compensation model. With competition for top talent as high as it is, offering fair, transparent pay for hardworking sales teams will ensure your business’s long-term profitability.

The success of a company relies heavily on the staff it employes. It is therefore critical to review compensation models in one’s industry to apply the best of what you learn. Moreover, during yearly reviews, ask each staff member for their thoughts; collectively you can create a better compensation model for sustainable growth.

Author Bio:  Devin Partida, Editor in Chief for Rehack, provides today’s guest blog. Rehack is ‘a community of engaged and curious people at all stages of their technology journey.

For more Insights, visit Elinor’s Amazon Author Page

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Sales Tips: Restructure Your Sales Compensation Model for Sustainable Growth

1. Commit to your long-term vision for accomplishment(s). 
2. Always keep long-term goals and those of your clientele, staff, and community in mind for the greater good and for everyone to feel the ‘win.’
3. With client goals, priorities, and values in mind – and yours -ensure everything is in proper working order including the compensation model for staff.
4. Ensure you only collaborate with people holding similar values.

5. Never underestimate anyone’s novel ideas; remember that each person and country operate differently.
6. Share favorite learning moments with peers and current clients to improve client engagement.
7. Habitually seek out new ways to improve engagement for business growth.
8. At the end of all communications, ask team members involved if they have questions to ensure clarification.
9. ‘Don’t give up – find a better way!’
10. Celebrate Success!

Today’s insights are provided to help you achieve the Smooth Sale!

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