BSC’s Design Guide To Success – Part 1

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.

Creating the most appropriate sales compensation program often requires a significant effort, following a methodical process with involvement from a wide range of key stakeholders. While the best designs require careful study of your particular strategies, company culture, and compensation objectives, our experience with hundreds of clients leads us to conclude that there are a range of factors that help ensure a successful design project outcome and process. This “Guide to Success” provides BSC’s Top Ten Tips when an organization takes on the task of improving its sales compensation program.

1. Substantiate and Confirm the Business Case for Change

The inception point for a new design effort starts with answering a simple question – why are we doing this? While this may appear somewhat obvious, we find that projects that end unsatisfactorily or crawl along at a snail’s pace often end up in that situation because the reason for considering and making changes was never precisely or clearly identified. There should be at least one compelling driver and a real need for change to the sales compensation program. Some prime examples include:

• The company has a new strategy – products, markets, growth objectives.
• New sales roles are emerging or being considered to achieve that strategy.
• Quantitative analysis identifies that the plans are paying unexpectedly, out-of-alignment with performance, or simply with a poor return on compensation spend – often measured through Compensation Cost of Selling (read our series on compensation cost of selling)
• The Compensation Board expresses concerns and wants to ensure sales compensation plans manage and minimize risk accordingly.
• Leaders or managers feel plans are out-of-alignment compared to best practices or current business environment.
• Turnover is suddenly or unexpectedly higher for the sales team.
• Merger and acquisition activity occurs – requiring incorporating sales teams and/or compensation programs.

This sampling gives a good sense of some key drivers of plan change; the key point is that there needs to be a compelling purpose or any efforts have a much-reduced chance of success.

Related to the notion of “why”, the various drivers often lead to different implications for the assessment and design process. Some require less rigor and fall under the notion of a plan audit or assessment, possibly followed by minor sales compensation plan tweaks. Others, particularly those representing significant strategic shifts, typically indicate the need for a more intense effort to identify and manage the organization through the change.

The potential degree of change helps companies understand both, what they are up against and what it will take to address it. Time requirements often adjust as well, with a low-intensity audit requiring as little as four weeks while a major redesign effort requires four to six months. Typically, if the current plans have been in place for three or more years, one can expect exponential levels of intensity will be needed to overcome inertia and the potential emotional ties to the current plan. In such environments, even when fixing a truly bad plan, the long-term team members may suddenly hold on dearly to the old plan – “it’s the best plan we’ve ever had!!” The key takeaway is to factor in the appropriate amount of time, intensity, and rigor in alignment with the degree of change your design effort requires.

In addition, plan changes with a genesis in a strategic business change (M&A, new products, competitive action or opportunity) often occur at inconvenient times within the fiscal year. These usually indicate the need for a reset of sales roles and sales assignments that can require more timing than is available in the remainder of a fiscal year. In these cases, it might make sense to consider an interim plan design that moves the organization in the right direction, deferring the organizational change to the next fiscal year when it can be planned effectively. The integration of two sales teams represents an example. Sales roles and assignments might remain in effect, but sellers may share objectives or have cross-sell crediting built into an interim plan until the teams can be integrated.