How complex should your commission plan be?

At Palette, we strongly believe that commission plans should be designed with all of the nuance of a sales process and larger business objectives in mind. In the past we’ve written about how ignoring complexity when designing comp plans can incentivize the wrong behaviors and leave revenue on the table. That being said, it can also be counterproductive to have a comp plan that’s so complex it leaves your reps scratching their heads trying to understand it. What’s the right balance? 

Well, even with a straightforward commission plan, you need different mechanisms to motivate high, medium, and low performers. What motivates high performers on your team is likely different from what motivates lower performers. You may also need to add in adjustments to help meet a short term objective, or to test a new approach, demographic, or product line. It’s never as simple as it seems. Even with a straightforward plan, complexity is a given. The question is, how can you manage complexity while keeping things easy to understand? 

There are typically 2 major concerns over complexity when it comes to comp plans: 

1. Operationalizing it. Incorporating complexity can lead to onerous manual work, errors, and overhead for everyone involved. 
2. Motivating reps. Reps may have difficulty understanding a more complex plan and using it to their advantage. 

Automation solves both of these concerns. A strong automation tool enables organizations to incorporate as much complexity as they need, while streamlining comp plan management. Ideally, once an automation tool is set up, administering comp plans should be as simple as approvals and payouts. Meanwhile, the tool should also provide visibility to reps, so that they understand exactly what they need to do to hit quota and earn their full potential. A dedicated tool provides reps with dashboards showing real-time data on quota attainment and payouts, helping them understand more complex plans. 

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