Sales compensation is more than just a paycheck. It’s the way you communicate with your sales teams. Strategy consultant Peter Lamb recently shared his approach to compensation planning with participants in LMA’s Family and Independent Media Sustainability Lab.

“Compensation is the purest form of communication,” Lamb said. “This is the foundation of effective compensation planning. What you offer in terms of salary, bonuses, and incentives speaks volumes about what you value in your sales team’s performance.”

Lamb challenged the group to answer the following questions about their current plans:

  • As the leader or CEO, do you believe this principle?
  • What are you telling your sales reps with your current compensation plan?

Simplicity drives success

The KISS principle reigns supreme: “Keep it simple, stupid,” said Lamb. The simplicity of your compensation structure can make or break its effectiveness.

It should be so straightforward that even a 10-year-old could grasp it, Lamb said. Clarity in compensation is key to motivation and goal alignment.

Think like the rep

“Let me take you back to the days when you were a sales rep,” Lamb said. “There were campaigns you hated and campaigns you loved. As a leader, how often do you think about that?

“I read an interview this morning with the CEO of Uber,” Lamb continued. “He said the best thing he’s done is be a driver for Uber, to learn about the complexities and think like a driver.”

“So I want you to think about that. If you had to go back in time, would you like the plan? How would you compare to the other reps?” he said.

Inspection for accountability

To hold sales teams accountable, “inspect what you expect,” Lamb said. If you set expectations for your sales reps but fail to monitor and inspect their progress, they may opt for the path of least resistance. Accountability is the linchpin of success.

Measurement fuels progress

Finally, Lamb says, “if you measure it, it’ll move.” When you tie compensation to specific metrics, such as the number of calls made, you create a powerful incentive for your sales team to excel.

In this recording, Lamb explains why these four essential points shape effective compensation planning and offers several scenarios for each one.