For 25 years, we asked our survey respondents to rate the effectiveness of their organization’s sales compensation plan on a five-point scale from very effective to very ineffective.
Interestingly, there was one batch of participants that stood out. We call them the “21%’ers.’
21% of companies rated their sales compensation plans as very effective. Was this a justified ranking or just wishful thinking?
According to our research team, these organizations were clearly more effective than their peers. These 21%’ers achieved:
The “21%ers” don’t win by radically different plan designs—they win by governance, clarity and consistency, translating sales compensation discipline into measurably better growth, productivity and retention.
Then, we asked ourselves how are these leaders succeeding and was there any overlap between their strategies that other organizations could use to improve their sales compensation plans?
This led us to identify the five core tenets of a world-class sales compensation program, which outline the five key elements that these 21%’ers had in common.
The very foundation of any good sales compensation program is its philosophy and principles. A clear and stable philosophy aligns compensation with desired behaviors and reflects company culture, serving as the program’s guiding light for consistent decision-making. But what should these elements look like?
First, this philosophy must be clearly defined. If a leader puts certain principles in place, those principles should be able to answer questions like:
Alongside this, the philosophy should also clarify what sales compensation program isn’t supposed to do. Sales compensation won’t replace sound sales management, compensate for a poor sales strategy or fix structural issues.
Just because an organization has their philosophy and principles stated on paper doesn’t mean that everyone will understand it. For leaders, it’s critical that key stakeholders understand these philosophies, their impact to the sales compensation plan design, and ultimately collectively agree that these are the right “north star” guidelines to drive their decision-making.
Lastly, leaders must ensure that this philosophy remains consistent. Unless an organization undergoes significant business changes, the philosophy should withstand the test of time to avoid confusion and misalignment.
By implementing a clear and consistent philosophy, leaders will be able to set the right expectations, align the sales force with their vision and avoid conflicts.
Another core factor for a successful sales compensation program has to do with strategy alignment—specifically, how well a company’s sales compensation program aligns with its growth strategy and sales jobs.
Growth strategies are deliberate, high-priority sales goals that are designed to accelerate revenue in specific areas.
Examples of growth strategies include acquiring new customers, expanding existing accounts or driving the adoption of new offerings.
Here are three essential questions that leaders can use to validate the firm’s growth strategies:
Alongside growth strategies, it’s essential for leaders to clearly define each sales job. Do not get trapped by job titles that may be out-of-date or corrupted. For example, there may be multiple job roles within an HR job title or multiple job titles that have the same role. In addition, lengthy job descriptions with ~20 bullet points of key activities will not help. Best-in-class companies distinguish each job role across three vectors – products/solutions, customers/buyers and sales motion/process steps.
Effective sales compensation plans are built with the right measures and mechanics to drive behaviors. Determine what behavior to drive is dependent on having a well-defined growth strategy and job roles. Many times, growth strategies and job roles are still being defined late into the year. Best-in-class companies do not wait for the strategy and job roles to be defined. The sales compensation leader starts the design process and uses their expertise to drive leadership decisions to ensure the sales compensation plan is rolled out on time. They become strategic advisors to their GTM partners vs. tactical implementors.
True expertise is rooted first and foremost in a deep command of sales compensation solutions, best practices and detailed market benchmarks. To ensure success, leaders should have a wide range of knowledge on current market trends, technical capabilities (including analytics, modeling, tools, AI and more) and change management processes. This information can empower leaders to conduct regular sales compensation audits/assessments, create plan design options/recommendations to drive strategic goals, perform rigorous sales compensation modeling and provide ongoing sales compensation training and education.
A successful sales compensation program isn’t held up by one individual, rather it’s designed and executed by multiple stakeholders including sales, operations, finance, human resources and legal. Because of this, leaders must be well versed in building trust and strong cross-functional relationships. Along with this, sales compensation leaders will also have solid communication, influence, negotiation and conflict management skills. All of this enables leaders to understand stakeholders’ perspectives, gather their critical feedback, and secure their vital support for the sales compensation program.
Creating an entire sales compensation program requires multiple steps, and every single step should be thoughtfully built out. That’s why successful leaders have end-to-end expertise in planning, assessing, designing, implementing, communicating and administering their sales compensation programs. This expertise also factors in strong project management skills as well as the ability to facilitate the decision-making process between stakeholders.
With all of this expertise, leaders will be enabled to advise their sales teams, senior management and other relevant stakeholders on creating and implementing a sales compensation program that will drive a company’s growth strategies while also reducing business and compliance risks.
If you look at best-in-class companies, you’ll notice they’re really intentional about how they manage their sales compensation program—they don’t leave anything to chance. Their secret? They focus on four main elements: governance model, operations, analytics and a metrics dashboard.
By bringing these elements together, companies can motivate their sales teams, hit business goals and keep costs in check—all while staying agile and transparent.
Last, but certainly not least, is change management. Whether implementing a small plan tweak or a complete plan overhaul, organizations need the right framework to implement plan design updates and drive behavior changes.
Leaders know that even the best designed sales compensation plans will not be effective if they are not communicated appropriately. Ultimately, any change to the sales compensation plan can directly impact a seller’s take-home pay and their ability to pay their bills.
For these reasons, leaders should take a structured approach to change management. Here’s a framework to guide the process:
Let’s face it. When you schedule a sales compensation rollout meeting, people show up. Thus, these rollout meetings are the optimal opportunity for leadership to restate the strategic goals and how the sales compensation plan design supports and rewards sellers for accomplishing those strategies.
The more support and clarity provided, the easier it is for teams to accept the changes and adopt the new model. Effective change management also builds and strengthens trust between leadership, the sales force and other key stakeholders.
For the 21%’ers, the five tenets outlined above enabled these leaders to achieve success. But what do these tenets look like when put into practice?
Take a look at our case study library, which highlights various industries and puts a spotlight on which tenets shined during each project.
Most leaders look for ways to gain a competitive edge among their competitors without recognizing their biggest advantage: People. Motivating and aligning individuals is where sales compensation becomes a powerful lever—not just for addressing business challenges but for shaping behaviors that drive results.
Because sales compensation is directly tied to an individual’s pay, it can affect their entire livelihood—how they support themselves and their loved ones. By outlining the right measures and weights, sales compensation can focus and motivate sellers on what matters most. When designed well, sales compensation connects personal motivation to organizational goals in a way few other tools can.