At a sales compensation workshop I attended last week, the speaker was sharing some of the latest trends in big data. This is a very exciting topic and one that is making a lot of headway with new methods for predictive modeling and improving our understanding of customers. Most of the excitement around big data is in areas such as research and marketing, but I wonder if it will begin to make its way into sales compensation. I think so, because as marketers become more exposed to big data concepts, they will inevitably pressure sales to include it in the compensation plan as well. Below are some steps you can take now to be prepared for that request when it does come.
Step 1: Define “compensation-grade” data requirements.
Big data holds a lot of promise, but it could also present some challenges, mainly with varying levels of detail across the nation. Big data partly gets its name from providing a lot of detail on individual customers. Companies can understand beyond an individual purchase to see other similar purchases, predictions on likely future purchases and sometimes even product usage. However, that increased detail may not be uniformly available throughout the country. Contrast this with direct sales data, which has consistent coverage across the nation but does not go much beyond sales. As big data becomes more prevalent, it will be important to define what level of coverage is required to be “compensation grade.”
Step 2: Define plan design alternatives for data that is not compensation grade.
As new data sources become available and we begin to understand the coverage at the territory level, we may find that the current plan structures are no longer fair. At this point, a few options exist, including paying bonuses on district- or region-level aggregates, flattening the payout curves, or using the data to inform MBO ratings. Spending some time today to determine which of these options would work for your company and pave the way later as new data becomes available.
Step 3: Introduce the new data in phases to manage the change.
The best way to introduce any new data is through three or four phases:
- First, share the data in territory and customer reports, but do not include it in the sales compensation plan.
- Next, include the data in a contest to increase familiarity and pilot using the data for compensation.
- An option at this point is to include the data in an MBO. This will allow you to include the new data source, but also allow for overrides by the manager.
- Finally, include the data in the sales compensation plan. It is important to limit the number of data sources to be used. If the marketing team wants to add a data source, ask if there is one the team would be OK with removing as well.
Hopefully, these three steps prove helpful as more and more companies are turning toward big data. It promises to be an exciting frontier, but not without challenges.