8 Red Flags Your Sales Compensation Plan Is Unfair (And Not Worth Sticking Around For)
As a sales professional, few things are more important than having a fair, motivating compensation plan. Your comp plan, perhaps more than anything else, demonstrates how much your company values your contribution. It‘s a key factor in both your day-to-day drive and your long-term career satisfaction.
So when changes to the sales compensation plan leave you feeling undervalued and under-compensated, it‘s not something to take lightly. Even if you‘re a loyal top performer who‘s familiar with your products and likes your team, an unfair comp plan could be a dealbreaker. It might be time to take your talents elsewhere.
How do you know if your plan has crossed the line from ambitious to unreasonable? Here are eight warning signs to watch out for:
1. Your quota increased without clear justification
Quotas need to be challenging yet achievable. If your quota seems to increase every year regardless of economic conditions or company performance, that‘s concerning. Management should be able to clearly explain, with data, how they arrived at your new number. They should also provide additional support, whether it‘s new products, extra marketing efforts, or better sales tools, to help you meet a steeper quota. If they can‘t justify the increase or offer resources to help you achieve it, that‘s a red flag.
2. The commission structure is confusing or illogical
Accelerators, SPIFs, and other incentives should align to encourage desired sales behaviors. But too often, comp plans include conflicting priorities. For example, one component may push you to maximize deal size, while another rewards you for getting customers to expand later on. If the behaviors being incentivized seem to work against each other, or if the plan is so confusing that you‘re not even sure what actions are being rewarded, that‘s a problem. You shouldn‘t have to waste time and mental energy navigating a poorly designed comp plan.
3. A new threshold makes it harder to earn commission
Some companies implement a threshold, meaning reps must reach a certain percentage of quota before they start earning commissions. If your company enacts a threshold or makes an existing one harder to reach, that‘s a worrying sign. Consider not only how high the threshold is set, but also how often it resets. A high threshold that resets monthly could result in an exhausting cycle of cramming to hit your number, only to start again at zero the next month. You may also be tempted to delay closing deals to the following month if you don‘t think you‘ll clear the threshold this month.
4. It‘s difficult to track your progress against goals
To stay motivated, you need visibility into how you‘re tracking against your number. But some companies still lack an accessible, up-to-date CRM that allows reps to easily gauge their performance. Even more concerning is when your progress is calculated based on factors outside your control, like when the client pays, rather than what you can influence directly, like when deals are signed. If you‘re struggling to determine where you stand, that‘s demoralizing and makes it tougher to course-correct as needed.
5. You‘re paid a flat commission rate no matter what
Uncapped commissions with exciting accelerators make overperformance worth your while. With a flat commission rate that never budges, where‘s the incentive to crush your quota? Companies may prefer flat rates because they‘re predictable and easy to administer. But they‘re far less motivating for reps than tiered commission structures with multipliers that kick in once you hit key milestones. Without compelling incentives, you may not feel the drive to push beyond 100%.
6. You wait ages to get paid on deals you‘ve closed
The longer the delay between closing a deal and seeing that commission hit your bank account, the less satisfying the reward feels. Ideally, you‘d be paid monthly, as quickly as possible after the ink is dry. Quarterly payouts may be acceptable if your commission makes up a relatively small portion of your overall compensation package. But if you‘re waiting several months or more to reap the rewards of your hard work, that could sap your motivation.
7. Calculating your commission requires advanced mathematics
Convoluted formulas for determining commissions not only delay your payday, but make it nearly impossible to estimate what size check you can expect. If your commission calculation factors in complex, interdependent variables, like implementation costs netted out over time or product bundles, you‘ll struggle to translate your efforts into dollars. A simpler, more transparent formula, with clearly defined rates based on percent of quota attained, makes it much easier to project your earnings and stay driven.
8. Your manager‘s goals seem misaligned with your comp plan
What happens when your manager is telling you one thing, but your comp plan is incentivizing you to do something else? For example, if you‘re paid on quarterly cash receipts but your manager gets compensated based on monthly bookings, your priorities may not line up. You‘ll be motivated to chase payments while your manager pushes you to book more deals now. It‘s a lose-lose situation when you‘re forced to choose between keeping your manager happy and maximizing your own earnings. A well-designed comp plan should have everyone rowing in the same direction.
What to do if your sales comp plan seems unfair
If several of the above issues hit close to home, you have a few options. First, try discussing your concerns with your manager. Come prepared with specific examples of how the comp plan is making it challenging for you to succeed. See if you can negotiate any adjustments to make the plan feel fairer.
If you‘re unable to reach a satisfactory compromise, take a step back and reflect. Are there other reasons to stay with your current company that might outweigh an unfavorable comp plan? Consider factors like growth opportunities, work-life balance, benefits, and your relationships with colleagues and clients.
Ultimately, though, if you‘ve exhausted your avenues for improving your current situation, it may be time to explore new opportunities. A toxic comp plan could be a symptom of bigger cultural problems. And even if you‘re willing to stick it out in the short-term, operating under an unfair comp plan will likely erode your motivation and performance over time.
Trust your talent
As a successful sales professional, you work hard for your paycheck. You deserve to be rewarded fairly for your contributions. If your current comp plan doesn‘t reflect the value you bring, don‘t be afraid to bet on yourself and look for a company that will compensate you appropriately for your skills and experience. With an equitable, transparent comp plan, you‘ll be empowered to do your best work and accelerate your career growth.
