Each week, we will highlight one of BSC’s Top Ten Tips from our acclaimed Design Guide to Success. To download the full guide, click on to the Articles page.
2. Schedule the Long-term and Interim Deadlines
Compensation assessment and design efforts should follow a methodical and efficient course.
There are project steps that clearly help create better outcomes, and project managers will do well to try to align around these tried-and-true milestones or gates. Best-in-class design efforts often include the following components, and we’ve included optimal timing based on attempting a significant change effort:
- Strategy Lock (Month 8 of Current Year). While business and sales strategies can evolve and finalize as the year moves on, major strategic shifts are ideally identified early enough to allow proper address of the dependent milestones to come.
- Role Lock (Month 9). The sales and service roles (existing, changed or new) should be clearly defined in terms of role and responsibilities. They must support the new strategic objectives, and one must define role expectations and how they impact organizational success.
- Role Assignment (Month 10). With roles defined, the next step is slotting the bulk of the sales force into any new roles. This “reality meets road” step helps organizations understand when role expectations need to realign or adjust – at times yielding to the dreaded, yet sometimes needed, “hybrid” type role. Hybrid examples can include having a single seller cover: 1) new and existing accounts, 2) large and small accounts, or 3) direct and channel-based accounts. Ultimately, the sooner the new role structure is tested at the assignment level, the sooner compensation plans can be formulated for all new or existing roles.
- Plan Lock (Month 11). Concurrent to the role assignment step, and after the majority of roles have been locked, the organization needs to finalize the new plans. Ideally, the new designs include TTC, mix, upside, measures, mechanics, crediting, and payout timing elements. The plans must also endure the financial cost analysis. While one-off plans in large organizations often require refinements after this lock point, the majority of plans, particularly for roles with critical mass, should be completed with at least one month to go in the current fiscal year.
- Plan Documentation (Month 12). With plans locked, the final month should be spent creating manager and field rollout presentations, plan documents, plan calculators, and any other communication tools necessary to support the degree of change embodied in the new designs.
- Communication (Go Live – First Two Weeks of New Year). While some companies believe new plans should be in a salesperson’s hands before the start of the new plan year, better practices, supported by numerous studies, actually point to a rollout during the first two weeks of the new plan year as most ideal. This ensures sales representatives are not distracted while closing out the current year, yet this is early enough to ensure any behavior shifts or motivational impacts are experienced very early in the new plan year. Revealing plans too early could also cause reps to game the system, particularly if a new plan rewards more for a result tomorrow than the current plan would offer today. Communicating new plans too early is a major “watch out”.
- System Update (By Start of Month 2). This timeline may feel late to some parties who would like to have everything in order on day one of the new fiscal year (often the same folks who communicate new plans prior to the start of the new year when reps should be pushing hard to finalize results!). While IT and comp admin teams need to have extremely high confidence that a new plan can be supported, the programming and testing needs to be completed prior to the first payment period, whether that’s the start of month two (monthly plan) or month four (quarterly plan). The “high confidence” mentioned should actually come during the design process, as we recommend including IT/systems in those discussions. But artificially trying to have systems updated by day one may put too great a burden on the strategy, role, and compensation design phases, potentially leading to poor or rushed decisions. These are often later “questioned” and then require rework before or after the start of the new plan year (with systems needing to be reprogrammed anyway). A rush to finish the plan actually causes a delay in the roll-out. Talk about a negative feedback loop! Avoid it.
One final point pertains to the degree of change. In some situations, the optimal plan designs are simply too significant to take on in one plan year cycle. In such cases, it is wise to create an interim plan with a step in the right direction and then more adequately plan for the wholesale changes in the next cycle, be it at the half-year mark or the next annual period. Change management matters; you must leave enough time to do it right.