Craft a Variable Compensation Plan That's Just Right For Your Business

Crafting a variable compensation plan that is fair to both your sales executives and corporate goals can be a daunting task. However, it's an essential part of your overall revenue operations strategy for long-term success. With the right plan in place, you can:

  • Create a win-win situation where both party’s needs are met, and
  • Secure a team culture of success aligned with corporate values. 

In this blog post, we'll look at how you can craft a variable compensation plan that rewards your sales executives for their performance while also helping to drive your revenue operations strategy forward.

Step 1: Establish Goals and Incentives

The first step in crafting a successful variable compensation plan is to identify the goals of both your organization and your sales executives. Establishing these goals will help you design a plan that works for everyone. It's important to consider your entire revenue operations program and both short-term and long-term objectives, such as increasing revenue and fostering customer loyalty. Once you have established the goals, you can begin mapping out how each goal should be incentivized.

When creating a variable compensation plan, consider both quantifiable metrics (e.g., revenue generated) and qualitative metrics (e.g., customer satisfaction). You may also want to consider using time-based incentives as part of your variable compensation plan, such as bonuses for meeting specific deadlines or thresholds for achieving certain results within specified timelines. Rewards should be commensurate with their effort and their success in reaching organizational objectives. Too often, organizations offer rewards without considering whether they are truly rewarding performance or simply creating a reward habit among employees. 

Step 2: Create Policies and Procedures

It’s also important to create policies and procedures that guide employees through the entire process of earning rewards under the variable compensation plan. This includes outlining expectations for tracking performance metrics, how bonuses will be paid out (such as on a quarterly basis), and what happens if targets are not met by a certain date or performance standards decline over time. 
Additionally, this involves ensuring that employees understand how their progress is being tracked and that they receive feedback on their performance throughout the process so they can see where they need improvement and development opportunities available to them in order to reach success faster and more consistently than before. 

Don’t forget the details, like taxes. It's essential to ensure that incentive taxes are taken into account when setting up the variable compensation plan; otherwise, employees could end up paying hefty taxes on their earnings without realizing it until too late.

Step 3: Align With Revenue Operations and HR Strategies
When crafting a variable compensation plan for sales executives, it’s crucial to look at how this type of rewards system fits into your broader revenue operations strategy. The goals and KPIs should get you closer to your revenue growth goals. Favoring metrics too much could lead to unintended consequences – more initials sales but disappointed clients and low retention, for example. 

Your plan should also align with overall goals for employee engagement and team morale-building initiatives within the organization. With clear expectations laid out beforehand – from what constitutes an appropriate reward size based on individual achievements all the way through how bonus taxes will be calculated – every team member has an understanding of what’s expected from them as well as what kind of support they can expect from management when striving towards mutually beneficial corporate outcomes year after year.

By taking these steps into consideration when crafting a variable compensation plan for sales executives, you can ensure that everyone feels valued while also helping move corporate objectives forward efficiently over time; thus enabling all involved parties to experience growth within their respective roles while strengthening relationships across departments throughout your organization all at once!

At FullFunnel, we believe in a holistic approach to revenue operations. Your variable compensation plan should reward the right behaviors, create revenue growth, and retain good sales talent. Schedule a free consultation with our revenue operations consultants to discuss next steps for your business.

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