Practical Sales Compensation – Getting Started (Part 1b)

Last time we talked about securing exec sponsorship, creating the right design team, and inclusiveness.

On to communication and educating the team members!

• Communication – A whole separate article could be written about the communication aspect of sales incentive design alone (in fact, click here to see my colleague’s article on this topic). Needless to say, it is extremely important and unfortunately, tends to get neglected in the process as other elements overshadow it. Just ask yourself how you would feel if you knew someone was fiddling with a part of your overall compensation. You would want to what was happening on a regular basis! A good approach here is to structure a communication plan that ties in with the overall project plan, key events and dates. Even if there is nothing particularly new or exciting to report, send a communication out that the team is still working through details, and some idea as to when more information will be available. There is nothing more detrimental to productivity than an endless stream of hypotheses and guesses as to what will happen and when. The more you can do to help sales people understand their pay, the better.
TIP – Create an e-mail address where questions can be addressed – Compile questions with answers and e-mail out to sales force and other parties on a bi-weekly basis.Securing accurate data – During the course of the project, data will be important for a number of things. It can be used to perform historical analyses such as understanding the correlation between pay and performance, the distribution of performance and income within the sales force, and which incentive plan elements are actually driving pay versus what may have been the original intent. Needless to say, the accuracy of data is imperative to ensuring you are making the right observations and drawing correct conclusions. Finally, as modeling is executed upon final plan design, you need to be sure you are comparing apples to apples, past versus anticipated future pay. The most common mistakes I have encountered include:
o Not eliminating partial year sales people (new hires and terminations) – this will usually widen the payout range on the lower end which skews conclusions;
o Using figures from different data bases – use figures that the compensation or sales operations department has used for past pay calculations.
o If you are changing definitions of measures make sure everything is very clearly stated and you run the numbers looking both backwards and forward in time to be able to do those apple to apple comparisons that are critical.

• Educating Team Members – If you have a strong, diverse Design Team, you will get a number of different perspectives, which is a positive. However, the team will likely have varying levels of exposure to sales compensation fundamentals. Having that base understanding about why you would choose a more conservative or leveraged pay mix, the rules around selecting performance measures, and why to have a commission versus a quota/bonus or MBO oriented plan, can make all the difference when it comes to driving consensus around optimal solutions. Keep in mind it is critical that all team members stand behind the final product that results from weeks (sometimes months) of analysis, interviews, and meetings that occur. There is nothing more detrimental to a successful plan launch than individuals disparaging various parts of the plans to the sales force behind the scenes.

TIP – Schedule one session with the Design Team at the start solely devoted to sales compensation fundamentals (a Sales Compensation 101, if you will) – This will create a strong foundation for a successful initiative.

On to the “sausage making”….