The Top Elements of a High-Impact Sales Manager Compensation Plan

June 2, 2023
Sheetal S Kumar
Sheetal S Kumar
Sheetal S Kumar
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Table Of Contents

Now why should a sales manager be eligible for sales compensation when clearly it's his colleagues who are getting the field work done?

A controversial statement, isn't it?

Well, it's without objection that a sales manager is a multitasker. They balance several responsibilities. At one point if they are strategizing a sales plan the next they will be giving sales coaching to their sales reps. One day if they are breaking their head over assigning team and individual sales quotas, the other they are calculating the industry status and market trends!

Being a sales manager and maintaining a high level of sales team motivation to achieve targets and goals is a challenging responsibility. Juggling crucial tasks while ensuring the team's consistent drive is no easy feat.

While taking care of all these responsibilities, shouldn't there be something that keeps the sales managers motivated as well?    

That is where the sales manager compensation plan comes into play. 

Let's delve into this article to understand how important it is to build an effective sales manager compensation plan and how to go about it. 

So scroll on for more interesting reading. 

What is the Sales Manager's Compensation Plan?

As the name suggests, a sales manager compensation plan is an incentive program that ensures that the sales managers are motivated to handle their multifaceted job responsibilities while leading a team of sales reps to achieve the company goals and sales quotas. 

Just like a sales rep incentive, a sales manager compensation plan is also constituted of two parts: the base salary and the variable pay. 

But it's not a simple base and variable pay calculation that goes into building a sales manager compensation plan. With their position and responsibilities, much more intensive thought must go into planning sales manager compensation to ensure its enticing to drive the expected results from them. 

So let's see what it takes to build an effective sales manager comp plan. 

How to Build a Winning Sales Manager Compensation Plan

How to Build a Winning Sales Manager Compensation Plan
  • Understanding The Industry Standards

Just like any other job designation, sales managers' pay must also align with industry standards. The hiring team must always keep a close eye on the competitors' offers and the industry status while drawing their pay structure. It must be a CTC that can attract top talents which ensures that the returns on investment are desired. 

  • Defining the responsibilities

The defining factor of a sales manager's compensation plan is the responsibilities they handle. Drawing a clear picture of the company objectives and sales quotas attainment expectations is required to understand if the sales manager is up for the game. Achieving these sales targets has a major impact on the sum amount a sales manager makes at the end of the quarter or year. 

  • Determining the On-target Salary

On-target salary is the total of the fixed salary and variable pay that the sales manager will earn at the end of the period upon achieving a 100 percent target. It must be clear from the management side what this amount will be and how the calculation and divisions are done to make the sales compensation plan efficient and effective. 

  • Creating a threshold plan

If you are an established organization with a defined sales process and an experienced sales team, then a threshold plan is an effective part of the sales manager's commission structure. Creating a threshold means the sales manager will start receiving variable pay only when his team has achieved a percentage of the quota that makes him eligible for the incentive. 

  • Offering Equity Grant 

Under equity grants sales managers are offered a percentage of the company stock instead of a monetary compensation. Applying this scheme in the sales manager bonus structure is a much more attractive way of ensuring sales manager commitment and engagement to the organization.

Tips for Creating a Sales Manager Compensation Plan

Tips for Creating a Sales Manager Compensation Plan
  • An easy-to-understand compensation plan

An easy-to-understand compensation plan is an effective compensation plan. People like their calculations to be simple and easily understood. This clarity in variable pay will give them a clear picture of the sum they will earn at the end of the period which will motivate them to strive harder to achieve goals. 

  • Earning in par with the responsibility

Organizations need to establish compensation plans that adequately reward sales managers based on their sales team roles and responsibilities. Providing validation, particularly through incentives, serves as a means to motivate sales managers, fostering consistent performance, commitment, and dedication in fulfilling their duties within the organization. Ultimately, this approach helps to reduce turnover rates. Failing to do so, they will feel overburdened by the work and slow down. 

  • Track the historic data for sales quota

Care must be taken from the time of hiring to check the potential and previous track record of the sales manager. They must be someone who can rise to the objectives of the company and attain its target. This historic data helps organizations to develop realistic and attainable goals on par with the sales manager’s talent and capability.

  • Understand your best practice expectations

The primary goal of incentive compensation management is to derive the best and expected practices from employees. So organizations must be clear as to what these best practices are and what positive behavior and competency they expect from their managers. These understandings will help organizations while building their compensation plan. 

  • Automate sales compensation plan

The most effective and seamless way to calculate your sales compensation plans and manage sales performance is through automation. Incorporating digital tools in sales compensation ensures that these estimations are done transparently without any error. Giving clarity in the sales compensation process improves sales performance and the integrity of the organization among the employees. 


The impact a sales manager can bring in the sales performance of the team and the entire growth of the organization is immense. 

The right talent can motivate the salesforce, ensure consistent performance, provide effective sales coaching, and assign realistic sales quotas to achieve the company objectives. 

As that role handles a great part of everyday operations, sales managers must be rewarded with a sales compensation plan that is transparent in its incentive compensation and effective in its sales performance management. 

Kennect helps in transparent incentive compensation and effective sales performance management to achieve operational efficiency. For more information Book A Demo TODAY! 


Sheetal S Kumar

Sheetal is a content strategist and writer at Kennect. She has extensive writing experience in content marketing and research, focused on small business enterprises and B2B Saas. She is passionate about creating engaging and insightful blogs while exploring the power of content and social media.


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