Table of Contents
Sales incentive plans are not a novel concept. For years, businesses have used them as levers to motivate their sales teams and drive performance. However, what's new is how rapidly they evolve in response to changing market dynamics, technological advancements, and shifts in team engagement.
That’s why staying updated with the latest sales compensation trends is no longer a best practice—it's a necessity.
And the outcomes of doing so are high-yielding:
- Outcome #1: Your business remains an attractive spot for top sales talent.
- Outcome #2: Moves you away from having a stale incentive plan.
- Outcome #3: Improves compensation transparency and accuracy.
Above all, your business becomes more malleable, ready to pivot its sales strategies when needed.
If that wasn’t enough, here are some noteworthy statistics that show why it might be the right time for your business to modernize your sales incentive plan.
👉 Employees who aren't appreciated for their good work are 2x as likely to quit in the next year. — Gallup
👉 Well-structured incentive programs can increase employee performance by 22% in individuals and 44% in teams. — Incentive Research Foundation (IRF)
👉 52% of voluntarily exiting employees say that their organization could have done something to prevent them from quitting their job. — Gallup
👉 65% of employees feel unappreciated in their current job roles. It affects motivation, morale, engagement, and productivity. — Fast Company
With that said, let’s delve into some of the most prominent sales compensation trends to watch for this year.
5 Sales Compensation Trends to Watch for in 2024
Here are some of the most prominent sales compensation trends to watch for in 2024.
1. Sales success will be redefined with individualized incentives
Consider this: While you value the diversity of backgrounds, demographics, and experiences of your sales representatives, you often adopt a one-size-fits-all approach to incentives. This is primarily due to its simplicity. However, what if tailoring incentive plans to individual needs wasn't as daunting as perceived? If it were feasible today, would you implement it?
Of course, yes! Customized incentives highlight and reward singular achievements, giving your salespeople a greater sense of control over their accomplishments. When rewards are tied directly to personal objectives and results, it fosters a culture of excellence and responsibility.
Personalized incentive structures ensure:
- You establish challenging goals for your team
- Your sales team become more proactive with their tasks
- Your employees play an integral role in the company's progress
Furthermore, these plans promote constructive competition among team members, spurring creativity and efficiency. By basing rewards on personal merit, businesses can better identify and retain their best talent.
How to go about it:
Collect information on both your sales reps and their customer accounts. Get a clear understanding of your client's buying behavior to customize nudges for your sales team. The deeper your insight into client decision-making, the more precise and effective these prompts will be.
2. Initiate with smaller subsets
Introduce a range of incentive options for sales representatives to select from. Determine the aspects where you'll allow flexibility, starting with fixed versus performance-based rewards if undecided. Consider varying the mode of delivering the performance-based component; for instance, some reps might appreciate time off or family-centric benefits, while others might prioritize monetary rewards.
Group your sales representatives based on their primary motivators. This allows for an analysis of each group's performance in the future. Such an approach aids in understanding how varied personalities perceive risks and rewards, react to diverse incentives, and handle behavioral tendencies.
3. Individualize small elements
Instead of modifying fundamental components of the plan, such as the compensation structure, begin by personalizing SPIFFs (Sales Performance Incentive Funds). This approach provides a chance to customize earning prospects and rewards with minimized risk.
It offers more adaptability to experiment with new incentives without unsettling the sales team. These short-term sales incentives also offer better manageability, require less long-term commitment, and eliminate the concern of being bound to the alterations.
4. Use the right ICM tool
A major challenge in personalizing incentive plans is the associated administrative load. Conventional ICM (Incentive Compensation Management) systems often fall short in managing the intricacies and personalization, adaptable reporting needed for individual compensation.
Also, many find it difficult to navigate the existing intricacies of sales compensation structures. So, seek an ICM tool that’s responsive to modifications and supports rapid and adaptable report customization.
5. Assess human resource and legal implications
Implementing a tailored incentive scheme represents a notable shift within an organization. From the outset, collaborate with your colleagues in Human Resources and Legal.
Rely on their expertise to foresee potential challenges with the plans and ensure that your personalized approaches promote fairness and equality.
6. Evaluate financial implications
Involve your financial team early in the process. Supply them with the necessary data and tools to help assess the financial risks and advantages of personalized plans.
Given that this is a new venture with potential uncertainties, it's vital to recognize and address these risks at the earliest stage. Implementing short-term pilot programs can provide tangible data, assisting in demonstrating the financial viability of personalized incentives.
7. Consistently oversee the program
The success of an effective incentive scheme hinges on regular monitoring, not just periodic reviews or relying on outdated data. A real-time, comprehensive assessment of individual incentives and representative performance will enable swift modifications, enhancing the program's effectiveness.
When introducing new strategies like personalization, continuous oversight becomes even more crucial due to its direct influence on revenue and the efficacy of your sales team. Rapid adjustments are essential if new incentives result in undesirable or unforeseen results.
2. Recruiting and retaining top sales talent will be high priority
While executive management will seek precise compensation predictions, sales teams will come with their economic expectations for 2024. The persistent talent scarcity, coupled with the previous year's inflation, is likely to lead sales professionals to anticipate higher salaries.
Employment restrictions in the tech sector may cause skilled sales representatives to explore opportunities in different fields. Any reductions or constraints on compensation might prompt your team to consider more favorable job prospects.
Consequently, 2024 will be a pivotal year for sales managers to attract top external talent and preserve their exceptional internal sales personnel.
How to go about it:
Collect information on both your sales reps and their customer accounts. Get a clear understanding of your client's buying behavior to customize nudges for your sales team. The deeper your insight into client decision-making, the more precise and effective these prompts will be.
2. Initiate with smaller subsets
Introduce a range of incentive options for sales representatives to select from. Determine the aspects where you'll allow flexibility, starting with fixed versus performance-based rewards if undecided. Consider varying the mode of delivering the performance-based component; for instance, some reps might appreciate time off or family-centric benefits, while others might prioritize monetary rewards.
Group your sales representatives based on their primary motivators. This allows for an analysis of each group's performance in the future. Such an approach aids in understanding how varied personalities perceive risks and rewards, react to diverse incentives, and handle behavioral tendencies.
3. Individualize small elements
Instead of modifying fundamental components of the plan, such as the compensation structure, begin by personalizing SPIFFs (Sales Performance Incentive Funds). This approach provides a chance to customize earning prospects and rewards with minimized risk.
It offers more adaptability to experiment with new incentives without unsettling the sales team. These short-term sales incentives also offer better manageability, require less long-term commitment, and eliminate the concern of being bound to the alterations.
4. Use the right ICM tool
A major challenge in personalizing incentive plans is the associated administrative load. Conventional ICM (Incentive Compensation Management) systems often fall short in managing the intricacies and personalization, adaptable reporting needed for individual compensation.
Also, many find it difficult to navigate the existing intricacies of sales compensation structures. So, seek an ICM tool that’s responsive to modifications and supports rapid and adaptable report customization.
5. Assess human resource and legal implications
Implementing a tailored incentive scheme represents a notable shift within an organization. From the outset, collaborate with your colleagues in Human Resources and Legal.
Rely on their expertise to foresee potential challenges with the plans and ensure that your personalized approaches promote fairness and equality.
6. Evaluate financial implications
Involve your financial team early in the process. Supply them with the necessary data and tools to help assess the financial risks and advantages of personalized plans.
Given that this is a new venture with potential uncertainties, it's vital to recognize and address these risks at the earliest stage. Implementing short-term pilot programs can provide tangible data, assisting in demonstrating the financial viability of personalized incentives.
7. Consistently oversee the program
The success of an effective incentive scheme hinges on regular monitoring, not just periodic reviews or relying on outdated data. A real-time, comprehensive assessment of individual incentives and representative performance will enable swift modifications, enhancing the program's effectiveness.
When introducing new strategies like personalization, continuous oversight becomes even more crucial due to its direct influence on revenue and the efficacy of your sales team. Rapid adjustments are essential if new incentives result in undesirable or unforeseen results.
3. Offering rewards for on all key touch points will become vital
Historically, sales representatives were compensated based on metrics like bookings, revenue acknowledgment, or contractual earnings. Such measures were apt when sales cycles were shorter and deals were straightforward, with the representative overseeing the entire process.
But in the modern B2B landscape, sales have evolved to become intricate, often involving prolonged cycles and team collaborations. Successfully finalizing a deal now depends on an entire revenue machinery that adeptly handles the intricate steps to achieve a sale.
Yet, despite these evolutions, why do we adhere to the same compensation metrics? Allocating budgets for compensation plans is a substantial commitment. You must ensure that they employ metrics that correlate with outcomes.
Even with the sales process's complexities, finalized sales remain the most dependable metric. This reluctance to adapt comes at a price. Without proper follow-ups or support, potential deals can slip through, and the current incentive systems may not effectively address these lapses.
An ideal compensation structure would reward efforts at every pivotal stage of the sales process, as each step can influence the deal's success rate.
While traditionally this wasn't deemed reliable, advancements suggest that soon such insights might be incorporated in compensation metrics. This integration will lead to three primary developments:
- Enhanced visibility into sales activities will allow for better quota predictions, rooted in actual sales cycles instead of generic annual projections.
- Compensation metrics will encompass more than just the final sale, enabling businesses to focus on perfecting every stage of the sales journey.
- Incentive programs will recognize and reward contributors beyond the primary sales representative, ensuring that significant contributors at crucial stages are aptly compensated for their efforts.
How to go about it:
Set clear, realistic targets for your sales team. When salespeople understand what's expected and feel the goals are attainable, they are more likely to be motivated to achieve them.
2. Personalized incentives
As mentioned at pointer #1, not all salespeople are motivated by the same rewards. Some may value monetary bonuses, while others may appreciate additional time off, professional development opportunities, or public recognition. So, segment the team and incentivize accordingly.
3. Tiered rewards system
Implement a tiered system where rewards increase as sales targets are surpassed. This encourages continuous effort, even after initial targets are met.
4. Frequent feedback
Regularly provide feedback, both positive and constructive. Recognizing achievements and providing guidance on areas of improvement can boost morale and drive.
5. Training and development
Offer training sessions or workshops to enhance sales skills. This not only benefits the salesperson's professional growth but also improves the company's sales figures.
6. Give team-based incentives
Foster a collaborative environment by introducing team-based incentives. This can enhance team spirit and encourage collective responsibility for meeting targets.
4. Salespeople will want their incentive plans to be transparent and accurate
Drawing inspiration from the principle that clarity fosters trust and a sense of security, it's clear that transparency in business can establish trust, boost morale, and cultivate a sense of belonging.
Simply put, transparency shapes a positive organizational culture. The significance of a positive work culture cannot be overstated, as those who've experienced a negative work environment can attest.
When it comes to sales incentives, achieving transparency shouldn't be a complex task. However, intricate compensation plans can inadvertently create confusion.
Eliminating ambiguity is vital for your company's success. As the battle to attract top sales talent intensifies, these professionals will increasingly demand clear and straightforward compensation structures from both current and prospective employers, which naturally leads to a more satisfied and cohesive workplace.
How to go about it:
Set clear, realistic targets for your sales team. When salespeople understand what's expected and feel the goals are attainable, they are more likely to be motivated to achieve them.
2. Personalized incentives
As mentioned at pointer #1, not all salespeople are motivated by the same rewards. Some may value monetary bonuses, while others may appreciate additional time off, professional development opportunities, or public recognition. So, segment the team and incentivize accordingly.
3. Tiered rewards system
Implement a tiered system where rewards increase as sales targets are surpassed. This encourages continuous effort, even after initial targets are met.
4. Frequent feedback
Regularly provide feedback, both positive and constructive. Recognizing achievements and providing guidance on areas of improvement can boost morale and drive.
5. Training and development
Offer training sessions or workshops to enhance sales skills. This not only benefits the salesperson's professional growth but also improves the company's sales figures.
6. Give team-based incentives
Foster a collaborative environment by introducing team-based incentives. This can enhance team spirit and encourage collective responsibility for meeting targets.
5. Automation via ICM tools will change the game
To respond to the highlighted trends, experts in sales compensation will increasingly pursue solutions that streamline and accurately automate tasks. In 2024, a rising number of firms will transition from handling compensation through multiple spreadsheets to adopting ICM platforms.
Similarly, companies currently using basic ICMs will gravitate towards providers offering seamless integrations, enhanced security, and superior user-friendliness. A robust ICM system, such as Performio, facilitates meeting these evolving demands through automated processes.
How to go about it:
Identify the current challenges or pain points in your existing incentive system. This could be manual calculations, lack of transparency, frequent errors, or anything else.
Determine your organization's goals for the sales team, such as revenue targets, new client acquisition, or upselling/cross-selling.
2. Select the right ICM tool
Choose a tool that aligns with your organization's size, needs, and budget. Ensure the tool is scalable, integrates with your CRM / Spreadsheets and other sales tools while offering robust reporting features.
3. Define the compensation metrics
Clearly outline the Key Performance Indicators (KPIs) that will drive compensation. This could be sales revenue, number of deals closed, customer retention rate, etc.
Decide on the reward structure. For instance, you could have a fixed base salary plus commissions, bonuses, or SPIFs (Special Pay Incentives for Fast sales).
4. Configure the ICM Tool
Set up the tool with your defined compensation metrics and rules. Use its features to automate calculations, ensure there are no overlaps or contradictions in rules, and set up alerts for any anomalies.
5. Maintain transparency
Make sure the sales team has access to the tool or at least to their own dashboards where they can track their performance and projected incentives. Clearly communicate any changes in the compensation plan through the tool, ensuring everyone is always updated.
6. Test before implementation
Before rolling out the tool to the entire team, test the configurations with a smaller group or with past data to ensure accuracy. Make adjustments as needed based on feedback.
7. Train the sales team
Conduct training sessions to familiarize the sales team with the new tool. Make sure they understand how their performance is measured and how it translates into incentives.
8. Monitor, review regularly, and report
Continuously monitor the system for any discrepancies or issues. Adjust the incentive plans as needed based on market conditions, company strategy, or sales team feedback.
Utilize the ICM tool's reporting features to get insights into the sales team's performance, the effectiveness of the incentive plan, and areas of improvement. Share these insights with stakeholders regularly.
Say goodbye to spreadsheet chaos! Create well-defined sales compensation plans with 100% transparency while keeping up with the latest trends via Compass!
Here’s how our ICM tool can help:
- Connects with your Spreadsheets, CRM, DMS, or ERP
- Automate complex commission structures and defines KPIs
- Calculate thousands of records in seconds
- Prevents payment errors and delayed disbursals
- Creates logic with rules, variables, and conditions
