When it comes to developing a sales compensation strategy, everyone thinks they have all the right answers. But the truth is that the whole process is a more involved equation than most business owners and managers are aware. Spend some time talking with sales experts, and you may find that your strategy is off by an inch or a mile. Following are 10 top tips for developing a sales compensation strategy.

A company's corporate goals should be the basis of any compensation strategy. Knowing those goals gives you a good place to start your planning.

"All compensation plans should revolve around the company's corporate goals. Take a baseball team as an analogy—in this case, the goal would be to win a pennant. Your compensation plan should dovetail with the goals of your company," says Chuck Connors, president of Omni Services, Inc., an industrial hose and connector distributor covering New England and headquartered in Worcester, Mass. "Your catchers are stocky, but not fast runners. Hence, you can't expect them to steal 40 bases or hit .350. You can expect them to handle the pitching staff and take charge of the team, as well as hit 20 home runs. They should be paid according to that position in the team. In contrast, the expectations of your centerfielder might be that he hit 40 home runs, steal a lot of bases, and catch a lot of fly balls—they too should be paid accordingly. Just like the sum of the nine ball players helps produce a pennant, the sum of your sales force playing their specific role helps you gain your corporate goal, such as profitable market share growth."

Handling existing customers and pursuing new business are two different activities on a salesperson's agenda; shouldn't they be treated as such in a compensation strategy?

"Look at your system," says Tom Reilly, president and founder of Tom Reilly Training, a sales, management and business training firm in St. Louis. "Are your people pursuing new accounts, or are they handling current customers? You may choose to pay more for new business rather than the existing accounts, or another scale for different product groups or mixes, or volume vs. product. No matter what you reward, your salespeople will do it."

"Consider bonuses to reward achievements of goals at the territorial level," says Dirk Beveridge, president of The Beveridge Consulting Group, a sales and marketing consulting firm in Barrington, Ill. "Question paying commissions at all. The inherent flaw is that with commissioned salespeople, management is inhibited and limited from doing what they are there to do—manage. Commissioned salespeople may do what's good for them today, rather than what's right for the company."

A fear of failure can make a salesperson not follow an established plan. Making them accountable for their actions, and their responsibilities to the company, keeps them on target and aligned with management.

"The days of encouraging your salespeople to run their own businesses are gone," says Beveridge. "Traditional compensation programs—which are heavy on commissions—need to be reengineered. Establish accountability beyond, 'sell a widget, get paid for a widget.' Heavy commissions don't drive salespeople to do the right things: i.e., promote the company's direction and goals, which can include product mix, market segments, market share, skills such as customer focus and adding value, and overall revenue."

Explains Connors, "Only pay people for their impact on the company. The era of just having a 'warm body' is over. Sales staff accountability is here to stay. Salespeople are knocked off their skates pretty easily. A lack of accountability can't be afforded."

Take the time to really figure out what each person on a sales staff is doing. Those extra minutes will help differentiate the salespeople from the order takers. Put another way, you can no longer have "pretenders," only keep "contenders."

"Do you go with a team or individual compensation strategy?" asks Reilly. "The team strategy benefits your low-end performer, who then may feel like they can perform even lower and still get paid. Your higher-end salespeople may begin to resent supporting the lesser sellers."

Connors agrees, telling managers to, "Come to grips with the fact that 10 to 15 percent of your staff will account for 85 percent of your sales. Don't get sucked into order takers being considered as salespeople. If a call comes in from Rhode Island, the Rhode Island guy will automatically expect to get credit for the order, even though they haven't really gone out and had anything to do with the order."

Each salesperson has his own strengths and weaknesses. Tailor the sales position to the selling strengths.

"Most distributors sell OEMs, MROs, front-counter customers and Internet customers," says Connors. "To use the baseball analogy again, the centerfielder would be the player who would be assigned to cover the OEMs, which would require a more go-get-them aptitude, while your catcher may be more apt to sell your MRO customers, who require constant care and immediate attention."

Some salespeople are in it for their career, and others are in it as a way into a different position in the company. Know these people for their ambitions, and motivate and compensate them accordingly.

"In some companies, sales offers more than one career path, like a step into a management position," says Reilly. "Build a program for those salespeople who see the position as a career. Have a mentoring program for them when they join the com-pany. You may want to motivate them with a 100 percent commission program—but give them the support and guidance they'll need from management."

There is no tried-and-true, everyone-do-it-this-way, "perfect" compensation program, so stop looking for one. Play with different equations and figure out what is best for you, your company and your salespeople.

"Plans can be built based on commission versus bonus versus base salary," says Reilly. "How do you use each? Commissions could be based on the amount of profitability, meaning pioneering in the territory. Bonuses are best used for very specific accomplishments, including the handling of existing accounts."

States Beveridge, "If looking at a salary plus bonus program, look at this rule of thumb. Salary should be 60–70 percent of the area's earning potential. The other 30–40 percent should be their incentive to help the company reach their goals and objectives."

"Some companies cap their salespeople's earning potential," says Reilly. "They wonder, 'Do we want our salesperson making more than upper management?' My thought is, 'Why not?' Why limit their selling potential at all?"

"There are other things you can offer a salesperson as an incentive," says Reilly. "A laptop computer, a gym membership or something that could benefit them beyond the reward. When they hit certain benchmarks, they could get these additional perks."

Just because your salespeople are getting paid well doesn't mean that they do not need any guidance, management input or strategy planning. No amount of compensation can turn a faulty selling program into a success.

"Too often, when a sales force needs additional motivation or stimulation, the first thing managers fall back on is compensation," says Beveridge. "Compensation will not alleviate the need for leadership or effective management. A manager is needed for coaching and such in the field. Offering more money is not always the best solution."

"Ask the equity question," challenges Reilly. "Are you giving as good as you are getting from your sales force? Look at that as your own goal, when it comes to compensation programs."