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.
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.