You may want to take a closer look at one major expense: salesforce compensation.

A survey of smaller firms by Makana Solutions shows a mere 13% of your peers classify their sales comp plans as “very effective” – even though over 75% of companies are spending 5% or more of their revenue on it.

To make sure you’re maximizing your plan, embrace these strategies:

1. Align behaviors with strategy

The whole point of a sales comp plan is to get people’s behaviors to advance your company’s bigger picture goals.

But are salespeople given too much to aim for? A good rule: Sales plans should have no more than three measures to keep people focused.

Note: Your company’s strategy may have shifted a bit in the face of the current economic situation.
Does your comp plan reflect that?

2. Use the right tools

It’s also tough to keep people’s eyes on the prize to get the results you’re after when they don’t have a clear picture of their progress.

The culprit? Spreadsheets. Most small to mid-sized businesses still resort to cutting and pasting in Microsoft Excel to monitor their programs.

That can introduce errors or even simple delays that derail your process. With so much on the line, it may be time to seek out a more sophisticated system.

Nothing motivates employees to boost performance like the green stuff. Unfortunately, almost half of the people responsible for bringing in new customers feel their compensation and incentive plans are too complex.

That’s according to Deloitte and Oracle’s latest Strategic Sales Compensation Survey of company salespeople. What’s making the plans so complex?

Increased team selling, more convoluted quotas and territory assignments, and a demand for more precise metrics, found the study.

As a result:

• over 40% of companies failed to meet their sales and revenue goals last year

• less than half (46%) of those surveyed believe their compensation plan is driving the right selling behaviors, and

• the amount of managers and directors “satisfied” or “very satisfied” with the performance of their sales force dropped sharply from 56% in 2006 to 49% today.

The study drives home the fact that for marketing and sales efforts to be successful, companies must have compensation plans that makes sense to their salespeople.

Now may be the time for the corporate suite (CEO, CFO, Marketing execs and Sales managers, etc.) to discuss ways to simplify compensation plans as much as possible.

Three best practices to consider:

• Look at the measurements. Confusing compensation plans usually have many performance measurements. Effective plans use three or fewer measurements.

• Review. It’s good practice to review compensation plans, and how satisfied employees are with them, once a year.

• Consistency. Changing compensation plan metrics sparingly helps reduce confusion among employees.

For more background, download Deloitte and Oracle’s Strategic Sales Compensation Survey.