Sales Compensation for 2013 and the New Fiscal Year… It’s Not Too Late!

By Per Torgersen

The end of the calendar or fiscal year usually includes some familiar activities – finalizing contracts for future shipments and revenue streams, finishing performance and salary reviews, getting budgets in by the deadline, and putting out the latest fire (while trying not to get burned along the way!).  But wait, with only a couple of months left, what about sales compensation – is it too late to make changes for the new year?  The answer is no, but expectations need to be set and certain actions need to be taken quickly.

Let’s first talk about realistic expectations.  If you want to do a complete overhaul of your sales compensation plans, you should probably set your sights on initiating those changes at the start of the second or third quarter of the calendar or fiscal year, if not waiting until the next one.  Trying to rush a large scale change tends to be a recipe for disaster.  If, however, you want to introduce some tweaks to align the plans with your coming year objectives, here are three pieces of advice:

Number 1: Take a quick qualitative approach.

Take the time to reach out to a few salespeople you trust to be objective and ask what has worked well and not so well with the current plan.  A focus group would suffice.  Don’t promise anything, but ask their advice as to what they would see as positive, motivating changes for the coming year.  They often have good practical ideas beyond just “more money!”

Talking to them will also give you a good sense of how well they understand their plan.  If you suspect they are not grasping the key elements, you may want to create a “plan calculator” (if you don’t have one already), which will let them play around with hypothetical and actual results to understand what they might earn given different scenarios or the impact of potential deals in their individual pipeline. It can also be a good time to re-communicate the strategic objectives of the year and how the compensation plan ties in with these.  Don’t forget to ask whoever is in charge of administering the plan what their biggest headaches are and how these might be resolved.  Making even a few small administrative changes can result in higher levels of motivation, satisfaction and impact.

Number 2: Assess your plan(s) against some of the basics in leading sales compensation design (click here).

In many cases, changes can be subtle but have high impact.  For example, reducing the number of performance measures to three or less to help focus the sales force’s attention, weighting performance measures so they are meaningful (e.g., one is not 98% of the incentive and the other two 1% each…) so the sale force does not ignore certain elements of the plan, or increasing the upside potential and accelerators to be more attractive to the sales force.  In some cases, changes to the weightings or accelerators are often not that difficult to for which to get approval and easy to implement.

Number 3: Consider Short-Term Incentive Programs

If you find that making changes to the compensation plan for the coming year is just not feasible, think about the one or two things you wanted to change or add, and try capturing these through one or two short-term “SPIFF” incentives.  These are generally contests lasting 1-3 months to generate excitement and signal products/services/results that are of particular importance to the organization.  This tactic can be especially useful when there is uncertainty around launch dates for a new product or service as it allows you some flexibility as to when you would pull the trigger for including in the core sales compensation program.  The key is to finalize the structure of the SPIFF program and obtain any needed budgetary approvals so you can move quickly when it’s needed.  Keep in mind you don’t want too many of these throughout the year, as they tend to distract the field and salespeople can become reliant on them.  A couple of them spaced out during the year should suffice and can be very effective.

Bottom-line, you still have time to address sales compensation plan issues that can make a positive difference for next year, but just make sure you quickly move it way up on your to-do list!