Each week, we will highlight one of BSC’s Top Ten Tips from our acclaimed Guide to Success. To download the full guide, click on to the Articles page.
To see last week’s post click here: http://bettersalescomp.com/clinton-gott/bscs-2011-guide-to-success-part-5/
6. Target Analytics to Supplement Your Process and Strategic Alternatives
Conducting analysis represents a critical element to a better sales compensation assessment and redesign project. Targeting the right analyses to supplement your process helps you to manage the amount of work to be conducted and the impact and usefulness of the data. A complete list of typical analyses can be found in BSC’s 6 Areas of Sales Compensation Assessment (contact us if interested). As an example, you might think of analyses as they relate to three stages of the design teams work:
I. Project Introduction. In this phase, your analyses should focus on setting a foundation of plan understanding for the design team. Key to this understanding are data such as: participation rates (how many sellers in each role receive payment from various components), earnings composition (how much of each pay component individuals earn and how does that vary as you move from lower earners to top earners), and actual risk and upside (degree to which top performers actually over-achieve on each component). To complete the foundational analyses, provide the team with a distribution of both performance results and payout results for each role. Together, these give an accurate idea of how people are currently getting paid.
II. Issue Examination. After confirming the key drivers of change, and hearing input on issues to address in the design effort, targeted analyses can be used to evaluate whether plan perceptions are accurate. An example would be to test if larger quotas actually lead to lower achievement levels by role or if top performers actually discount heavier than lower achievers. The results can be used to prioritize factors to be addressed in the design effort and to identify potential solutions.
III. Alternative Testing. As the design team considers various plan design alternatives, modeling and other forms of data analysis can help to evaluate the desired impact of specific changes and to modulate the degree of impact a change might have. For instance, a company may seek to introduce a “bookings” component in addition to a “revenue” component in its plan. Analytic examination could look at the impact of shifting dollars to the new component or of blending the achievement of the two results into a combined “weighted-average sales volume” on payouts. Such testing helps you avoid unexpected outcomes or impacts.
Analysis should be an ongoing effort throughout the project and by defining the intended objective of each analysis, work effort can be focused and timely, thus meeting the design team’s needs as the process progresses.
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Each week, we will highlight one of BSC’s Top Ten Tips from our acclaimed Guide to Success. To download the full guide, click on to the Articles page.
To see last week’s post click here: http://bettersalescomp.com/clinton-gott/bscs-2011-guide-to-success-part-4/
5. Identify Leaders with Veto Power – and Engage Them Early and Often
We recommend carefully identifying potential individuals or leaders who may be able to exercise veto power at any point in a design engagement. This varies by organization. If one’s CEO is particularly hands on, either in managing the sales model or in extreme cases, chiming in on sales compensation measures or formulas, you need to determine how to best involve them at appropriate points and avoid the eleventh hour veto. In our work, we call it, “pulling a Pete”. Pete, as we’ll call him, was a highly engaged and likeable CEO from one of our clients. Pete become part of our vernacular when he basically hijacked the design process late in a project, indicating that he had no faith in the design team and we should just continue our work directly with him. Unfortunately, he lacked everyday touch with the field organization, and the resulting few weeks were burdened with massive inefficiency. With little time left in our design window, we ended up having to step back, quickly collect his directives and views, and then work backward with a sub-portion of the design team and those with knowledge of the day-to-day realities. It was an entire redesign, retracing our steps to form an almost perfect circle. By “perfect”, we mean frustrating and suboptimal. To avoid a “Pete-like” experience, we recommend the following:
- Understand executive viewpoints and involve them early. Know what you are up against. If a leader is very hands on, ensure his or her voice is heard early, his objectives and goals are clear, and he is given a chance to co-author the process by which you will create the new plans. We now tend to assume leaders want more of a say than less of a say, so attempting to have an early project discussion with veto-eligible parties is a wise expected step in any project.
- Have the executive charter the design team. While this may not fully satisfy a CEO with OCD (obsessive-compulsive disorder), letting them identify at least some of the design team body will give you a leg to stand on when design recommendations cross his or her veto desk.
- Agree on the approach for executive check-in sessions. A hands-on leader may need to have check-in conversations after each major design team meeting, while others may be fine with a single review when initial design constructs are taking shape. We recommend assuming they will want more involvement versus less, and let the leader push back and hopefully provide the truthful and realistic mandate for the design team to do its work.
Hold the executives accountable. With a leader’s feedback incorporated, his or her co-authorship of the design team members and process, and frequent check-ins, you will have gone a long way toward avoiding an eleventh hour shift. Most leaders are in those roles for a reason; they are strong business people, prone toward logical and rational behavior (that’s our story and we’re sticking to it!). If things do start to teeter at the project’s end, you have a defensible and emotion-free list of reasons why the current design approach should continue. That hopefully will go a long way.
Posted in Clinton Gott, Sales Compensation, Sales Compensation Design, Ted Briggs | No Comments »
Each week, we will highlight one of BSC’s Top Ten Tips from our acclaimed Guide to Success. To download the full guide, click on to the Articles page.
To see last week’s post click here: http://bettersalescomp.com/sales-compensation/bscs-2011-guide-to-success-part-3/
4. Demand Strategic Selling Inputs
This piece of advice derives from the milestone gates identified in Tip Two. Offered directly to the capable and helpful human resources or sales operations professional (or whomever “owns” sales compensation plan creation), our advice is to noisily and emphatically push back on strategic leaders and/or sales management if and when they are slow to identify strategy or provide clarity in the selling roles. Say it with us, “effective sales compensation plans derive from clear sales role definition”. Now, say it again, and if needed, say it to those individuals.
Encourage them to follow the milestone timeline we portrayed earlier. While ambitious in some environments, moving directionally toward such a timeline is essential for providing enough time to successfully assess needs, construct plans, and test impacts. You may not completely win the fight for a completely enlightened and methodical process, but the goal should be to takes steps in that direction each and every year. The quality of the sales compensation plans, your performance, and the organization’s acceptance of new plans all depend on it!
Do you know what we find to be the number one reason design efforts fail or struggle? Answer: incomplete, late, or poorly delineated sales role definition. Organizations are better served by breaking out the phases of changing the job versus changing the plan. Involving the right strategic selling inputs is the essential predecessor to one’s design work.
Posted in Clinton Gott, Sales Compensation Design, Sales Effectiveness, Ted Briggs | No Comments »
Each week, we will highlight one of BSC’s Top Ten Tips from our acclaimed Guide to Success. To download the full guide, click on to the Articles page.
To see last week’s post click here: http://bettersalescomp.com/sales-compensation/bscs-2011-guide-to-success-part-2/
3. Build the Right Teams
The sales compensation assessment and design process embodies the ultimate cross-functional team effort. It requires
multiple participants, involves essential stakeholders, and can become unwieldy if participation, roles and commitments are not clear. Ideal processes include a design team responsible for reviewing all inputs and crafting design recommendations, as well as an approval team responsible for testing those recommendations and ultimately signing-off on final designs. Successful outcomes typically heed the following advice:
- Involve the right people on the design team. An effective design process ensures the design team represents the organization’s needs and its various stakeholders well. They need to be informed, should demonstrate good judgment, and must be highly engaged. They also need to be respected; recommendations from a design team with respected members are much more likely to be subsequently respected by executives, not to mention salespeople. Salespeople, in particular, will look at the design team membership and the sellers need to trust the participants. Design teams normally include representatives from sales, human resources, sales operations, finance, and IT/systems.
- Involve decision makers early and clearly. Senior executives normally end up approving the plans, and if you want to avoid late-in-the-game surprises, their perspectives must be factored in early. Bottom-line, the design team needs to understand what they want the plans to support or what principles matter to them. Of equal importance, the approving parties need to give credence and authority to the representatives on the design team. That is not to say the approvers need to follow every recommendation from the design team – indeed, that would make the design team the approving team – yet the design team members and process must be considered important and their recommendations supported more than vetoed. The decision makers need to give them their charter and mandate. We cover this key topic again later.
- Separate design efforts where it makes sense. In today’s complex multi-divisional organizations, a perception often exists that all groups need to receive equal attention or have similar needs. In many cases, that is simply not true. If one division is undergoing more strategic changes while others are remaining more status quo, the design process and approach can certainly vary in focus. Indeed, exerting limited resources on the groups or sales team with the greatest needs and opportunities just makes good sense. We often separate groups into high, medium, and low touch in terms of need and focus. While some low touch groups may bristle, particularly if they feel like the red-headed step child (no offense to step children or Gingers), most will be thankful to not exert unnecessary time and energy if a need doesn’t exist. They’ll thank you, and you’ll thank us for this reality check.
Posted in Clinton Gott, Plan Communication, Sales Compensation, Sales Compensation Design, Ted Briggs | No Comments »
Each week, we will highlight one of BSC’s Top Ten Tips from our acclaimed Guide to Success. To download the full guide, click on to the Articles page.
To see last week’s post click here: http://bettersalescomp.com/sales-compensation/guide-to-success-part1/
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.
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