Messaging Sales Compensation Plans: A Comprehensive Guide for Leaders

Establish a basic framework that leaders can utilize to communicate compensation plans with clarity.

After completing the analysis, deliberating with your leadership team, and creating your compensation plan, failing to establish a fundamental structure for communicating the plan would be like dropping the ball at the 5 yard line.

Effective Communication

As a VP/Head of Sales or a founder, you have a seat at the executive table where all aspects of the business are considered. Conversely, your sales reps likely engage in fewer macro-level conversations with counterparts in engineering, product, and customer success, as they remain focused on new business.

While context switching can be challenging, it is crucial to recognize the significance of how people are compensated and take messaging seriously. Even the most attractive compensation plan will fail to produce results if it is not communicated effectively.

The objective of this post is to establish a basic framework that leaders can utilize to communicate compensation plans with clarity.

Owning the Message: Why Sales Leaders Must Communicate Compensation Plans Themselves

The sales leader of your organization must own messaging. No matter who assisted in building the compensation plan, the sales leader SHOULD NOT outsource messaging to anybody else. 

Sales leaders must be involved in building compensation plans, while also understanding the plans like the back of their hand, so they can address questions quickly. If a plan has a minor change or update, it must continue to be managed by the leader of the sales department.

In my experience, sales leaders who outsource messaging run into problems. Sales reps will have questions for their managers that will eventually move up the ladder to the head of the department, and he/she needs to answer those questions versus relying on Business Operations or Revenue Operations to step in. 

If sales reps and sales managers see that the Head of Sales can’t answer questions about the plan or delegates to other teams without getting personally involved, there’s a real chance the sales leader will lose trust and confidence with their team.

Communicating the Plan

Sending the compensation plan via email and expecting sales reps to review it on their own time is not an effective approach. Instead, create a simple slide deck that highlights the key points of the compensation plan. During the meeting, walk through the math and provide three examples of a rep's productivity: 150%, 100%, and 80% to quota.

After the meeting, send a recap of the presentation via email to ensure everyone is on the same page. It's crucial to address any questions or concerns in real-time to avoid any confusion or misunderstandings.

The Three-Day Schedule

Messaging a compensation plan should be broken down into 3 days with distinctly different meetings each day: 

• Day 1: The Sales Group Meeting 

• Day 2: The 1:1s

• Day 3: The BizOps/RevOps Group Meeting 

Day 1: The Sales Group Meeting

The Head of Sales schedules a 50-minute meeting for the end of the day on Wednesday with all sales managers and reps. If you have different tiers of reps, such as Mid-Market AEs and Enterprise AEs, separate the meetings accordingly.

The first meeting is scheduled for Wednesday at the end of day to avoid losing a day of productivity. If the meeting is held on Monday, Tuesday, or Wednesday morning and doesn't go well, it could cost multiple days of productivity. By having the meeting on Wednesday, sales reps have time to think through any questions with two more days of the week available to address them.

During the presentation, set the stage by encouraging participation and questions. Start by reviewing the north star of the business and how the compensation plan aligns with the company's goals. Begin with the macro and move to the micro, going through each slide slowly.

The slides that show examples of reps hitting 150%, 100%, and 80% are crucial. If the reps don't understand the math, the compensation plan will not be effective in its goal of motivating sales reps properly.

Record all questions asked during the meeting in a document for tracking purposes. At the end of the meeting, make it clear that 20-minute 1:1s will be scheduled for the following day.

Day 2: The 1:1’s

It’s critical for every individual contributor to have a 1:1 with their manager about the compensation plan. 

Each Manager/Director needs to set aside as much time as needed on Thursday to have 20-minute 1:1s with each rep to review the plan together and allow reps to ask questions. 

Even if a rep says they completely understand the plan, this 1:1 should be utilized to get a temperature gauge on how they’re feeling overall. Compensation changes can cause even a small minority of people to feel disgruntled and could spread negativity within the group.

The Head of Sales needs to make sure that all these 1:1s happen and be prepared to reach out to individual people the same day or the next day at the latest.

The Head of Sales needs to collect all notes and questions from sales managers after their 1:1s and centralize the questions in the original group meeting document. 

Day 3: The BizOps/RevOps Group Meeting 

The Head of Sales schedules a 50 minute block on Friday for a meeting with BizOps/RevOps counterparts to join a group meeting with sales reps. 

It is up to the Head of Sales whether he or she believes they need to actually loop in these other departments for this final group meeting. If major outstanding questions are still on the table by Friday, it’s critical to send the centralized document by end of day Thursday and conclude answers for Friday’s group meeting.

The Head of Sales is responsible for leading this group meeting by asking their counterparts questions directly from the document. If the executive team has outstanding questions they can not answer, then they must own it. An example of what you could say is: “A few of you have pointed out a blindspot in our plan and we thank you for it. We will be working over the weekend and early next week to come to a conclusion as quickly as possible and schedule another meeting with all of you next week.” 

Default to transparency.

If there are mainly minor questions, The Head of Sales can remove the other departments from the invite and have the meeting to address outstanding questions and make it more of a “check-in call” for facetime with sales reps and managers.

Navigating Sales Rep Reactions to Your Plan 

Changes to compensation can be a challenging experience for salespeople, equivalent to organizational changes for other employees. Each sales rep's reaction to these changes will vary, and as a sales leader, it is your responsibility to understand their individual stories and address any unhappiness before it spreads across the organization.

While the Thursday 1:1s with direct managers are there to address any concerns, it may be necessary to schedule a 30-minute meeting on Friday with the Head of Sales to provide the rep with ample time to express themselves and work towards a solution for their core issues.

It’s critical to understand what motivates each sales rep as it’s possible it has nothing to do with compensation! 

Mark Tipsword, one of Leap’s Advisors, said it best:

“Comp plans are important, but other methods or commendation and recognition sometimes matter more in the big picture. Being recognized for a major account win will often be equally motivating to the bigger paycheck.”

If you don’t understand what makes each of your people tick, work to figure that out asap. This is best done in ongoing 1:1 meetings. 

Why Agreements are Crucial

As a quick reminder, once the compensation plan has been finalized, it's important to send out the plan in the form of agreements and have them signed electronically. This will eliminate any ambiguity about the plan and ensure that reps have a clear reference point for their compensation. While I'm not an HR or legal consultant, I highly recommend following this step to avoid any confusion or issues down the line. If you have an HR representative or legal counsel, it may be a good idea to have them assist with the creation of the template for the agreement, so everything is in good order.

How Sales Compensation Impacts Company Culture

As a final note, Peter Drucker famously stated that “Culture eats strategy for breakfast.” Compensation doesn’t create your culture, but it’s a huge driver of it. Think about how salespeople move up in your organization through the milestones you’ve put in place and how the compensation plan drives the behavior of your salespeople. Consider the following questions:

• Does your compensation plan make it doable for north of 70% of sales reps to hit their numbers? Are people feeling successful?

• Is the base salary so high that some reps are just sticking around doing the minimum and not working so hard for the variable portion of your plan?

• Is the base salary low, but providing reps with the ability to 4X their base salary in variable compensation? Is this driving aggressive sales tactics, and how do sales reps work with other departments because of this?

These questions are just a few examples of how your sales compensation plan impacts culture. Your company's north star, culture, and sales compensation are all tied together.