An effective sales compensation plan takes into account all associated costs for the sales team and the exact nature of the product or service in question, in order to create a rewards system that balances the efforts of the team members that directly correlates to the benefit for the company. The plan should also match the needs of the team, focusing on monetary or other types of rewards as necessary.
A sales compensation plan encourages members of a sales team to meet goals and quotas through positive reinforcement by issuing rewards for successful actions. Creating such as plan begins with examining the nature of the sales division to determine how frequently sales occur and the direct impact it has on the company, in order to choose a rewards structure that is both sustainable and worth the efforts of the employees. For example, if the sales team is small and makes only a handful of sales each month, it may call for a more extensive compensation package than a large team that makes dozens of sales in the same period.
The plan also needs to include a clear description of the reward structure and explain exactly how and when an employee may receive compensation. This method should directly reflect the ways in which the team makes sales. Some plans may choose a quota system, wherein the employees receive a bonus for meeting a large goal, whereas others may reward employees multiple times for meeting different levels.