The Truth Behind Best Practices in Sales Compensation

Christopher Goff is a Certified Sales Compensation Professional with over fifteen years of experience in sales operations and compensation functions, ranging from quota setting, sales incentives design, CRM reporting and analysis, and more.

He is the Senior Director of Sales Compensation at Labcorp, designing and implementing sales incentive programs in 25 countries. He is also the Founder, Author, and Speaker of Sales Comp Guy, a resource for small businesses to learn the basics of building a sales compensation program.

In a conversation with Justin Lane, Christopher discusses why some common sales compensation practices aren’t best practices and the importance of pay transparency at companies. They also explore the role of sales incentives at not-for-profit organizations and how to structure compensation for median and top performers.

Listen to this episode of The Sales Compensation Show to learn:

  • Why common sales compensation practices aren’t always best practices
  • The importance of being transparent about pay structure
  • How to structure compensation for median and top performers

Three key takeaways:

#1: Common practices aren’t always best practices

What may seem like common practice in sales compensation may not always be the best practice.

Sales incentive plans are designed to motivate sales reps to achieve their goals and drive revenue for the company. However, corporate context matters in sales comp—and while some general principles and guidelines around planning and design can be helpful, it’s essential to have a comp strategy that is unique to your business.

"For your plan to work, it needs to be distinct and unique to you and your current sales compensation strategy." - Christopher Goff, Labcorp

Sales compensation involves multiple factors: base salary, commissions, bonuses, quotas, and territories, as well as distinctive products with unique margins, customers, and sales cycles. The interplay between these factors is complex, making it difficult to define best practices that can be applied universally.

Ultimately, the most effective sales compensation plans are those that are tailored to the unique needs of the organization and its sales representatives.

Evaluate your sales compensation practices regularly to ensure they align with your overall business objectives and motivate sales representatives to achieve the desired results. Consider your unique goals, products, and target markets when designing your plan and stay up-to-date on changes in the market and advancements in technology that could impact your strategy.

#2: Be transparent about your pay structure

It’s not easy for your sales organization to be fully transparent about what everyone makes. But if done right, it can be highly effective.

Christopher believes that as long as people understand there’s no reason to pay everyone the same amount, there’s no issue in being transparent with compensation. This is a growing trend in companies. The transparency in compensation needs to be aligned with equal clarity on the skills required for progression at each level.

He also thinks we need to become more comfortable with having conversations about compensation:

“The most important component to pay structure transparency is ensuring we are comfortable having the conversation. And that means leaders, companies, and employees—we all need to have a greater appreciation for why we’re paid a certain way.” - Christopher Goff, Labcorp

Sales organizations should be transparent about their pay for several reasons:

  1. Builds trust: Pay transparency builds trust between the organization and its salespeople. When reps understand how their pay is calculated and how it aligns with their performance, they are more likely to feel valued and respected.
  2. Increases motivation: Salespeople are highly motivated by their pay. When sales organizations are transparent, it can help motivate reps to work harder and achieve better results. Additionally, pay transparency can help to reduce the likelihood of compensation disputes.
  3. Improves retention: When salespeople feel they are being paid fairly, they are more likely to stay with the organization. This can help improve retention rates and attract top talent.
  4. Complies with laws and regulations: In some jurisdictions, organizations are required by law to be transparent about pay. Failing to comply with these laws can result in legal action and damage the organization’s reputation.

Sales organizations that are open and honest about their pay structure are more likely to have an engaged and motivated sales culture, which can lead to increased revenue and overall success.

#3: Unlock sales team potential with differentiated pay

When designing sales compensation plans, it’s important to consider the needs of the entire sales team, including top performers and those struggling to meet their targets.

Designing sales compensation plans for the median (or middle) performer can have several benefits:

First, it ensures that the majority of the sales team can achieve their targets. This can help promote a sense of fairness and equity among team members, leading to higher levels of job satisfaction and motivation.

Second, designing plans for the median performer can help to avoid creating an unwelcoming sales culture. When plans are designed solely with the top performers in mind, it can create a situation where those at the top are rewarded while those in the middle or bottom may feel undervalued. This can lead to a lack of collaboration and teamwork, ultimately hurting the entire sales team’s performance.

Finally, designing plans for the median performer can help to ensure that the compensation plan is aligned with the company’s overall goals and objectives. By designing plans that reward consistent performance and steady progress, companies can encourage their sales teams to focus on long-term success rather than short-term gains.

Justin and Christopher explore this idea at 24:48 in the podcast.

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