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Value of Well-Designed Sales Compensation Documents

By Dave Egloff | December 23, 2019 | 1 Comment

sales compensationSales OperationsSales Strategy and Design

Sales compensation documents are too often written to satisfy the needs of the organization as opposed to the needs of the seller. Sound crazy? Perhaps but it’s true. Certainly, these documents codify the terms and conditions of how commissions are earned. However, the issues are apparent when you consider “will sellers find this document easy to read and understand?”.

Sales compensation has the power to attract, retain and motivate sellers. Nonetheless, sellers must have a line of sight to connect their pay and performance. Moreover, they must easily be able to read the compensation document and understand what is being asked of them. Sadly, according to Gartner’s research, only 24% of sellers understand how to calculate their commissions. Sellers will not perform as you expect unless they know how you intend to reward and hold them accountable.

Sales Compensation Documentation Guiding Principles

Here are some simple guidelines to consider when drafting sales compensation documents to improve seller understanding and alignment.

  • Be empathetic – Sellers are typically not attorneys, so whenever possible avoid the legal jargon. You may also want to define terms that may not be clear to sellers or potential new hires.
  • Use examples – There are many opportunities to provide a list of exceptions, illustrated calculations, etc. Using examples reinforces the message and improves seller understanding.
  • Arrange sections – Certainly, well-organized documents are more easily consumed. Documents with clear sections and headers improve scannability and help sellers revisit the document later.

Compensation Document Sections

Effectively written sales compensation documents look different from organization to organization. The sequence and sections that improve seller acceptance and understanding include:

  • Sales Strategy and Role Priorities
  • Compensation Plan Goals
  • Performance Measures and Payout Curves
  • Crediting Methodology and/or Administration
  • Commission Calculation Methodology and Examples
  • Plan Governance, Terms & Conditions
  • Dispute Resolution Process
  • Acknowledgment Signoff

As a final recommendation, use multiple form factors to supplement the core sales compensation document. If the goal is to convey a message to motivate behaviors and outcomes, using a mix of message types will reinforce the message and improve the likelihood that sellers know how the compensation plans work.

Sales compensation documents written for sellers are better for the organization and the sales community. Given the time of year, when most organizations are designing and writing compensation plans, take the extra steps to improve the documents. As a result, you will increase your ability to motivate seller behaviors and reward sales outcomes.

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  • I was reading the provided article with a great interest! This post is useful and informative.