It’s Time to Start Designing Your 2026 Sales Incentive Plans
Hard to believe that, as of this writing, 2026 is just three months away. So once again, it’s time to think about your sales incentive plans for another new year.
Did you know that the shelf-life of even the most well-designed sales incentive plan is two years, at most? And simply tinkering with the design of an older plan just doesn’t cut it in today’s uncertain times. If your current plan is at the two-year mark, then it’s probably time for a redesign.
These tips can help you develop a sales incentive plan aligned with your organization’s goals and tuned-in to sales force and market needs.
Start with an assessment
Before designing sales incentive plans, establish your business objectives and decide how best to influence the behavior of your sales people. Interview your sales people to assess what they like and dislike about the current sales incentive plan.
Then consider the following questions:
- What is our organization’s desired market position?
- What factors are driving sales?
- Have we consistently met our sales and profit goals?
- How well do we differentiate incentive pay-for-performance (e.g., top performers should earn a bonus two to four times the medium incentive)?
- Is there a connection between what senior managers are communicating and how our sales incentive is working?
- Do our sales incentive plans drive the right behaviors and outcomes?
- Are some sales people gaming the incentive plan to maximize their bonuses – but not company margins or profits?
- What is the right mix between base pay and incentive pay?
You might also ask, what are your market thrust initiatives? For example, do your current plans drive sales of new products? Or is the sales force emphasizing only the tried-and-true products because there is little incentive to sell new products?
Timely communication, line-of-sight metrics
Incentive plans can often end up gathering dust on the shelf because they’re too complicated or poorly communicated. Good sales incentive plans have direct line-of-sight, meaning they clearly state how the incentive is awarded and how the compensation serves the company’s business objectives.
Tie incentive compensation directly to simple measures, such as sales or gross profit – something sales professionals can impact. Sometimes companies link sales compensation to measures which proves too complex and reduces line-of-sight because sales professionals have little or no impact on the selected performance measure.
Build the communication launch for your new sales incentive plans so that you’re communicating one or two weeks before the plan’s effective date. When sales people understand and buy into the plan, it will have the best chance of success.
I can’t stress enough how important it is to get a new plan done before 2026 rolls in. You don’t want to be that company whose fiscal year starts in January and publishes its sales incentive plan performance measure in April. I can almost guarantee you that you’ll miss sales opportunities, demotivate your sales team, and lose sales momentum.
Culture matters
Gauging company’s culture is a critical step in the compensation plan design process. One large company used a templated commission-based compensation plan and didn’t customize it for their organization. This plan ran counter to the company’s culture, which had a successful history with plans that combined base salary and incentives. No surprise: the new plan failed.
Our firm, on the other hand, invests the time needed to understand our clients’ company culture before developing new compensation plans.
We conduct confidential interviews with the business leaders, sales managers, and the sales force. We ask about morale, turnover, what’s succeeding, and what isn’t. We probe into the case and tolerance for change. Then we weigh these factors when building their comp plan.
Assess your plan
After the first six months on the new plan, assess it to see if you’re getting the desired results. Analyze the bonuses and payout results. You’ll rarely want to switch plans mid-year, but you may want to make adjustments.
If you realize you can’t track a particular performance measure on your plan, don’t use it. You need to know what is and what is not bringing in the right kinds of sales.
Looking forward
As we enter the fourth quarter, it is time to be forward-thinking and lay out your sales incentive plan for 2026.
Call us to learn more about how we can work with you on this very important part of your business. Call today: 732-842-8634 and ask for Don McDermott. Or e-mail him at dm@dgm.com.
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