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April 18, 2010
Compensation 101: Sales Compensation Plans

Sales compensation has changed dramatically within the last decade. Historically, sales people were paid a rate based on the total sales they brought in. More recently, companies have changed to a system where sales people are now being paid on the total profit they bring in instead of the total revenue.

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We have also seen a greater focus on how much the sales staff costs an organization. Costs include not only the salary and benefits, but also overhead, travel, expenses, administrative costs, and costs of support staff.

In a BLR webinar titled "Compensation 101: Essential Secrets and Strategies for HR Professionals," Paul R. Dorf outlined some of the factors that influence the design of sales compensation plans:

  • Special nature of sales people
  • Organizational strategy
  • Competitor practices
  • Product/services sold
  • Length of sales process

Dorf also outlined the keys to success in creating effective sales compensation packages:

  • Clearly define sales goals
  • Effectively track and measure performance
  • Rewards that are competitive and motivational

Paul Dorf is the Managing Director of Compensation Resources, Inc. (CRI). CRI (www.compensationresources.com) specializes in providing comprehensive Compensation and Human Resource consulting services. Dorf is responsible for directing consulting services in all areas of executive compensation, short and long term incentives, sales compensation, performance management programs, and salary admin programs.

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