Four Principles to Simplify Compensation and Accelerate Performance
In August, I watched with awe the perfect orchestration of 79 interdependent events that together slowed the 2,000-pound Curiosity rover from 13,200 mph to 1.5 mph and placed it carefully onto the surface of Mars. The supersonic parachute deployed, the rocket separated, jets fired and Curiosity was gently lowered onto Mars. Amazing.
Then, the NASA team that had poured themselves (and $2.5 billion) into successfully launching Curiosity nine months earlier, rejoiced in watching the rover do just what they had built it to do.
Sales and compensation leaders share that NASA team’s spirit, dedicated to rigorously designing and testing plans that satisfy business objectives and stakeholders, and help achieve uncharted levels of sales performance. And you certainly rejoice when plans do what they were built to do.
But do you really need supersonic parachutes?
The 2,000-pound rover in the room is that overengineered plans built to achieve these objectives are often less effective than simpler alternatives. Elements that feel critical become supersonic parachutes, doing just what parachutes were built to do: slow progress.
Well-designed incentive plans require both science and art, and the process of getting there is, as the saying goes, paved with good intentions. In my experience, unnecessary plan complexity arises from a necessary series of how-to questions. How do we …
- … ensure our salespeople focus on the right customers, activities and products?
- … drive the right product mix, including a balance of onetime and recurring sales?
- … reward key activities, like teamwork, collaboration and early period selling?
- … drive top-line revenue, average selling price and overall profitability?
- … set fair, motivational and fiscally responsible quotas and payout curves?
Remarkably, Curiosity landed a mere 1.5 miles from its target. But what if it had a device that allowed it to land exactly on target? Would the precision have been worth the complexity and increased risk of malfunctions elsewhere?
High-tech sales and compensation professionals must constantly address the same questions: It’s not if but how you answer that makes all the difference in where you land.
Here are four principles to guide your mission:
- Prioritize. Finding the optimal plan begins with an evaluation of which outcomes are most important (e.g., higher motivation vs. fiscal responsibility).
- Keep it simple. Plans should have no more than three metrics. The best designs start with one and layer on metrics only when the benefit outweighs the marginal cost.
- Enhance visibility. Your sales force deserves metrics within its control, and which provide line-of-sight into measurement and payment. Avoid overly complex calculations when setting quotas and payout curves—make your plan crystal clear.
- Use your managers. Utilize your first-line managers’ capabilities and avoid overdependence on incentives to motivate. If your managers aren’t good coaches, the comp plan won’t matter.
Several weeks ago, I sat with a group of business leaders who were frustrated with plan complexity but couldn’t see a way out. One of them put me on the spot: “Enough. What should we do?”
I responded they should keep their primary metric and eliminate the others. It would ultimately generate better results and the sales force would love it. He agreed. Do you?
Can your sales force benefit from a simpler plan, or do you need that supersonic parachute?