In multiple incentive practices surveys that we’ve conducted over the last several years, the need for simplicity in the plan design has risen to the top three issues in every study. “My salespeople don’t understand the plan” and “My compensation plan is too complex” are oft-heard refrains.
On many occasions, we go into some of these same companies to help them overhaul and simplify their sales incentive plans, and when we look at the plans in question, they’re actually already pretty simple in some cases—at least on the broad spectrum of sales incentive plan complexity that we’ve seen. So what’s going on here? Why are relatively simple plans being rated as overly complex?
In short, salespeople don’t understand their plan, regardless of the plan’s level of simplicity. Here are four common issues:
- Poor documentation: The materials that were developed to roll out the plan are not effective at clearly describing how the plan works.
- Poor communication: The rollout cadence of the new plan doesn’t have enough touch points, or the right touch points.
- Lack of sales manager ownership: Sales managers don’t take responsibility for “owning” the new plans and effectively communicating them to the sales team.
- Poor technology support: Frequent progress reports aren’t delivered to the field, and salespeople often don’t know where they stand.
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To avoid these issues, here are a few steps that you can take:
- Simplify the plans as much as possible. Ensure that there’s a single owner of the comp plans (usually the vice president of sales) to prevent the “too many cooks” issue that ruins many plans.
- Clearly document the plan and provide multiple examples. Show salespeople not only how they make money, but what they need to do to perform well on the chosen metrics.
- Communicate the plans over and over, using multiple media and communicators. Begin with the national sales meeting, but have many touch points along the way.
- Hold sales managers accountable for knowing and explaining the plans. Managers should be able to answer 90% of the questions that arise. Sales operations should not be getting a lot of unfiltered questions from the field that the manager can’t (or won’t) answer.
- Invest in technology support. This doesn’t have to be a full-fledged sales performance management system, initially. Some of our clients invest in developing and distributing simple email messaging to their salespeople who are close to a milestone in the sales incentive plan, and they’ve seen profound results.
When designing your sales incentive plan, ensure that the plan is both simple and understood. Both are important—and not necessarily the same.