TREX Sales Incentive Plan Design 4

Question 1

A 'windfall' in sales incentive plans refers to:

Accepted Answer

A sudden large commission earned due to circumstances largely outside the rep's control

Answer

A windfall occurs when a rep earns an outsized commission due to external factors (e.g., a massive inherited account), not exceptional individual effort.

Question 2

Which of the following is a primary advantage of using a 'commission rate' structure over a 'bonus' structure in sales compensation?

Accepted Answer

Provides a direct line-of-sight between each sale and the rep's earnings

Answer

Commission rates give reps immediate, visible feedback on how each transaction affects their pay, creating strong behavioral line-of-sight.

Question 3

When a company transitions from a straight commission to a salary-plus-incentive plan, what is the most common reason?

Accepted Answer

To exert more control over non-selling behaviors and activities

Answer

Adding a base salary allows the company to direct rep time toward activities like training, reporting, and customer success that a pure commission structure may discourage.

Question 4

What is the recommended maximum number of performance measures in a well-designed sales incentive plan?

Accepted Answer

Two to three

Answer

WorldatWork recommends two to three measures to maintain rep focus; more measures dilute attention and obscure the link between behavior and reward.

Question 5

In territory design, 'territory alignment' is critical to incentive plan fairness primarily because:

Accepted Answer

Unequal territory potential makes quota attainment inherently unfair across reps

Answer

Reps with high-potential territories have an easier path to quota, so misaligned territories create structural inequity regardless of plan design.

(TREX) WorldatWork Total Rewards Certification Practice Test

(TREX) WorldatWork Total Rewards Certification Practice Test

TREX Sales Incentive Plan Design 4