Incentive Compensation

5 Things to Remember While Designing Your 2022 Compensation Plan

Samra Taban
min read
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It’s that time of the year again, well, almost. The festivities have already begun. Thanksgiving is here and in our heads, we’re already opening gifts under a Christmas tree right now. As the year draws to a close, it’s also time to start thinking about closers: your sales reps. 

Unless it’s a Christmas miracle, not everyone is going to meet their targets and over-perform every single time. In general, 80 percent of your sales team should be able to meet their quota. Your compensation plan has to further motivate top reps to overachieve whilst also motivating other reps to attain their quotas.

Comp Plan 2022

When it comes to incentives, a strategically and carefully-considered compensation plan is non-negotiable. The more fairly and lucratively you reward your reps, the more they close deals and bring home the green. 

The end of the year is the perfect time to revisit your compensation plan and make tweaks in it to align them with your business goals. So, how can you revise your compensation plans to further motivate your sales teams and inculcate desirable actions to boost revenue? 

I’ve put together a few blind spots that require your attention. Evaluating them makes your compensation plan ultra-potent and set to have your sales reps Usain-Bolting to the finish line and much, much beyond. 

Usain Bolt

1. Review numbers from the last few quarters

All the prompts you need to improve your comp plan lie in the quota attainments and payouts to reps. They will give you a fair idea of how each component in your plan has performed. You can decide which components to retain and which ones to remove based on the pattern of performance. In addition, you can ask yourself the following questions:

  • How many reps have achieved quota? 
  • What percentage of your sales team hits quota every single quarter?
  • Who attained quota and why?
  • What does the payout look like overall?
  • Why were reps not able to achieve quota?
  • Did you pay too much or too less? Why?
  • Are you overpaying poor performers and underpaying top performers?

2. Drive the right behaviours through your plan

Now, let’s set aside the numbers and look at actions. Besides hitting targets, are your sales reps exhibiting behaviours conducive to accelerating revenue? If not, list out what behaviours you want your reps to develop and weave it into the plan. Behaviours could be closing multi-year deals, bringing in new logos, teamwork, social and cross selling, CRM hygiene and so on. 

Once you’re fixed on behaviours, think on what’s the best way to reward them. However, keep in mind that too many components in your plan might distract your reps from their quota or prolong closures more than required. You would also want to keep your compensation plan as simple as possible and too many elements can add unwanted complexity to it. The ideal step here would be to pick a couple of behaviours to add to your plan and launch SPIFs during the quarter.

3. Include powerful accelerators

You know that adrenaline rush when you hit the boost button in a car race? There’s nothing quite as thrilling as your car picking up speed and zooming to the finish line. That’s an accelerator for you: a boost for your reps to perform even better. But, when does an accelerator come into the picture? You can set a minimum % attainment for reps to activate accelerators. And, here’s a godsend for reps who over-perform: multi-tiered accelerators. This is a juicy incentive for reps to give it their all and surpass their targets to bag a higher sales commission rate.

What you need to ponder upon is whether your accelerators are too hard to achieve (no one gets a higher commission). Also, if you are rewarding incredible performers, are you also reprimanding poor performers? Decide whether you want to include a decelerator or any other means of increasing morale of subpar reps in your team. 

4. Chat with your stakeholders

A tale might be timeless but not your compensation plan. You need to get back to the drawing board as often as you can to make it better for the business. So, for the forthcoming year (2022, please be good), shake things up and make your plans work for you. 

For starters, huddle up with your reps and find out what motivates them. Ask them about what worked well and what didn’t in the last quarter. Understand how quotas were met and at what point did reps lose the race. This data is priceless in shaping a cogent compensation plan set to squeeze the performance out of your sales teams. 

Next, talk to other stakeholders involved in the mix to get their take on the compensation plan and clearly communicate the has beens and what’s in store for the big 22. These conversations help avoid misunderstandings, misalignment, and administrative bottlenecks that may arise throughout the year.

Additionally, research market OTEs. Why is it an important step that you shouldn't skip? To make sure that your OTEs rise as per market standards. Passion and excitement could be primary drivers for your reps to perform but money is also a pretty damn incredible criteria. You wouldn’t want to lose good reps because the other players in your industry offer better monetary benefits. 

The above data should be sufficient to decide whether your 2022 comp plan needs to be simplified or could also require a few more components. 

5. Keep it objective without any manual inputs

When you’re considering multiple criteria in compensation, you could very soon lose objectivity. Avoid components that aren’t very easy to track. Here, in order for your reps to make any kind of progress, you’d have to manually give inputs as the metric is too subjective to analyse. Instead, add metrics in the compensation plan that are quantitative in nature. This way, you remove any room for subjectivity and your reps can review it themselves and focus their efforts towards improving their numbers. 

Your reps not only have to understand their performance metrics included in the plan but also  have clarity on what actions can have an impact in the commissions without much intervention from your end.

Final thoughts

You have drafted comp plans for your sales reps. Now what? Do you just launch it and hope for the best? I hope not. If you’re building a product, would you ever dare to launch it or run a demo for your customers without even testing it? NEVER. You’d spend months backtesting to ensure that your product does what it promises to do. Same goes for compensation plans. Before you communicate your comp plan to your reps, simulate and backtest your draft incentive plans against real data. 

Everstage's incentive plan designer

It’s always nice to receive some reassurance that you’re heading towards the right direction in rewarding your reps. Everstage helps you get powerful modelling insights even before publishing them and effectively optimize your incentive structure. Plus, you’ll have our RevOps experts suggest compensation-best practices that you could incorporate based on the business goals you’ve set out to achieve. 

To learn how Everstage can help you effortlessly configure your custom plans and crank up the power of your incentive planning, schedule a demo with us today. 

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