As a consultant, I often have discussions with companies about how they need to "fix our comp plan."
With Halloween approaching, and costumes top of mind for many parents and kids, I thought I would touch briefly on three things that I often see masquerading as issues with the comp plan.
1) Unbalanced Alignments
2) Aggressive Forecasting or Budgeting
3) Poor Communications
By "alignments" I am referring to the rep-to-account or rep-to-geography assignments that, over time, can become suboptimal. Consider a sales team that pays commissions based on sales volume. As a rep signs more and more accounts, his or her commissions become higher and higher, while newer reps may find it hard to make money. Similarly, unbalanced alignments can lead to underworked reps calling on too few or less important customers, while overworked reps are not giving enough attention to all of the higher-value customers in their territories. Watch out for statements like, “We need to add a component to the comp plan to ensure we're only calling on top-tier customers!”
Aggressive Forecasting or Budgeting
Sales compensation plans are often asked to fix overall trends in underperformance. Have you heard something like this before: “We missed our forecast last year by 3%. This year, we are being asked to grow another 8%. We need to change the compensation plans to drive this growth!” While proper compensation plans can certainly fuel growth, what if the current compensation plan was already designed around growth? Is the 8% realistic, regardless of the effort of the sales force or the impact of the compensation plan? Keep an open eye for forecast trends that break sharply upward and ask whether the compensation plan alone can or will drive that growth.
Your company spent considerable time and effort developing a new sales compensation plan. You aligned with strategy, modeled performance, developed a reward system that truly rewarded top performers, rolled it out … and the sales force hated it. Why? Maybe they didn’t understand it. Maybe they didn’t understand the need to change in the first place. If a compensation plan is not communicated effectively—how it works, how it rewards performance, even why it’s in place—the sales force may believe the metrics or measures themselves are flawed.
Fixing these issues can be a challenge, as sales compensation directors or analysts may not have any input, with the exception of the communications, into the upstream alignment or forecasting processes. One way to help address such issues is by elevating to a centralized sales operations function. Another option is to use ZS’s Sales Force Effectiveness (SFE) Navigator tool to assess where your greatest challenges and priorities lie. Download it for free at www.zsassociates.com/SFENavigator.