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Glossary Terms
Compass - The Only Sales Glossary You Need
Compensation strategy refers to an organization's overarching plan and framework to attract, retain, motivate, and reward employees effectively. It involves determining how much employees should be paid, both financially and non-financial, for their contributions to the organization. A well-defined compensation strategy aligns with the organization's goals, values, and culture while remaining competitive.
Compensation strategy refers to a structured plan devised by an organization to attract, retain, and motivate employees through various forms of financial and non-financial rewards. It outlines how an organization intends to compensate its employees in alignment with its business objectives, culture, and market dynamics.
An example of a compensation strategy could be implementing a performance-based pay structure where employees receive bonuses or salary increases based on their individual or team achievements, thereby aligning compensation with productivity and organizational goals.
Common types include:
Each type supports different business goals and sales structures.
Organizations should design a compensation strategy when setting up or scaling a sales team. Regular reviews—at least annually or after major business changes—ensure the plan stays competitive and aligned with market trends, business objectives, and sales performance.
Sales roles thrive on clear incentives. A strong compensation strategy boosts motivation, drives desired behaviors, and helps attract and retain top talent. When reps know how their efforts translate into earnings, they’re more likely to stay focused, competitive, and loyal. Without a defined approach, sales teams risk confusion, disengagement, and high turnover.
To design a compensation plan, you need to follow the steps outlined:
