A few key principles may guide you here:

(1) Be clear on how much and for what measures the managers involved can "move the needle," with a direct effect on the company's financial results. Product Managerscould be measured on product line gross margin or operating income, with a similar measure for Program Managers, for example. But make sure the measurement and reporting systems will support robust measurement of their results.

(2) Be sure you have enough incentive to actually motivate and drive behavior towards the results you want. Anything less than about 15% of target cash compensation may not be worth the cost of designing, reporting and administering the plans (in terms of the effect on results). This can be tricky if you are offering incentives for the first time as you probably don't want to reduce base to fund them. If you can redeploy budgeted money from a broad-based employee incentive plan to help fund it, you can bring the pay mix in line over time through reducing the increases in base and putting them towards the variable portion.

(3) Be careful with target setting. You need to aim for about 60% of your employees on variable pay plans to be at or above target, or it won't motivate much.

(4) Offer enough upside. If you are putting people in an at-risk pay
situation, possibly for the first time, you need to be sure a few people really ring the bell and get a handsome payout (1.5-2.0 times the target incentive), and publicize and celebrate these successes -- it helps motivate everyone.

(5) Be sure the people in the role have the risk profile to find this
motivating (or that that is the sort of person you want in the role, and are willing to make the needed adjustments). Not all solid employees are "coin operated."

One good place to start is with a book, and I recommend both "The Sales Compensation Handbook" edited by Stockton Colt and "Compensating New Sales Roles" by Colletti and Fiss. In addition, there is a very helpful course offered by World at Work, "Elements of Sales Compensation." And Cygnal will be offering classes in the fall as well in cities around the country. Sales compensation design is exciting and challenging, but it is high-stakes work. There are terrific ways to really create value for your company, as well as wrong answers that can create a disaster. If your company's challenges are significant, a consultant can help.

My company is considering instituting a plan where all team members would share in a commission on sales made. I'm looking for ideas - how is it structured, are all sales included in the group commission, etc.

The key principle that comes to mind here has to do with how the sales are made. Do the team members depend on each other to be successful? If they do, for each sale, then a team incentive where they have a single team target and a single team actual result, all receiving the same payout, makes great sense. If each team member has his or her "own" sales, and also supports the effort of the team, then an individual sales goal and a team goal may both be indicated (usually with a higher weight on the individual goal).

What type of inside sales are they doing? Do they qualify for the 7i exemption or are they non exempt employee? These questions must be answered because, if they are non-exempt, any incentive earned must be included in their hourly rate. If they are exempt, it would make it much easier to implement an incentive with less administrative costs. Assuming you conclude they are either exempt, or that the administrative burden if they aren't is "worth it," then here are a few tips for designing their incentive plans:

(1) Incentives are a great way to support an initiative to change behavior, but the rest of the initiative needs to be in place as well. This may include training, systems enhancements, coaching and mentoring, etc.

(2) If you really want to use incentives to motivate and excite, they need "carrots and sticks" to be part of them. Over time you will want to migrate base salaries down as a percent of target total compensation so that the target incentive must be earned in order for the employees to maintain market-competitive pay.

(3) The amount of pay at risk depends a great deal on the nature of their inside sales roles. Although it can be more complex than this, one simple division is between jobs that are primarily "inbound" and those that involve more aggressive "outbound" calling. If an inside seller mostly reacts to requests from customers and is primarily doing an order management function (perhaps with some ability to cross-sell or up-sell), then a relatively smaller percent of pay at risk (in the incentive) is appropriate. For outbound inside sales people who more strongly influence a prospect's decision to buy through their own creativity and initiative, more pay at risk (and more associated upside) would be a good idea.

(4) Beyond this, the basic principles of role-based incentive design apply, including:

- Pick measures that are linked directly to income generation for the company

(e.g., revenue, units sold, margin) rather than activity level (e.g.,number of calls)

- Pick as few measures as possible to cover the primary accountabilities of the role. One or two would be a good number for a newly-instituted plan. Three might be OK. More than three would have to be well-justified as it dilutes both the message communicated by the incentive plan and the payout value of accomplishing any of them.

- Design the plans with sales leadership's involvement so that they introduce them with a message like, "Here are our new incentive plans. We are thrilled to share them with you because we believe they will significantly increase both your income and that of the company. Let me show you how . . ."

- Provide great materials to communicate the plans -- since the reason you're doing it is to motivate and excite your inside sales people.

- As soon as you have an idea of what the final design may be, start planning for accurate and timely administration of the plans and great reporting. You risk losing much of the motivational value if employees don't see a frequent and easily understood connection between their results and their earnings.

Our counsel is generally to pay for results, financially measurable results (as opposed to activities). Sales compensation, to be really motivating, generally involves significant cash and upside -- and you want to be sure that those payouts are rewarding sales people for results that more than cover the money to be paid.

With that said, other great measures besides just sales/bookings/revenue generally have to do with the quality of the sales dollar. Some sales dollars may be more valuable to your company than others -- like sales of more profitable products or services, or sales of strategically important new products, or sales into an important targeted industry segment. Also, sales over goal are generally more lucrative for the sales person than those below goal. And consistent sales performance is often valued over sporadic sales performance. These are just a few of many alternatives to just paying on sales. But picking the right one is all about aligning the rewards with what is most important to the success of the business.

I won't venture a legal opinion here -- and believe it is likely to vary from state to state. However, I will assure you that it is common practice to recover commissions paid in cases in which the company is not paid. To be sure you're covered legally, and that everyone knows what to expect, you would do well to document your intention to do that in your compensation plan document. Your plan document should also cover how you intend to handle leaves of absence, terminations, and claim the right for management to change the compensation plan at their sole discretion. Once you have that document in place, have a local lawyer review it, and you'll be all set.