I’ve been thinking about simplicity a lot lately with my sales compensation projects. In every single design kickoff meeting that I had this past fall, “Make it simple” was one of the top objectives of the plan design. However, nearly every plan that I was involved in ended up being more complex than any of the team members had originally hoped.
Part of the challenge was that there was no tipping point on when the plan went from simple to complex. Each change was taken by itself and seen as an incremental, but worthwhile, addition. But what if we could define that tipping point? Here are three approaches that might work.
- The “Rule of 3”: This is one place to start. Providing three things that the sales rep needs to do to achieve his bonus could be one measure of simplicity. Once your plan requires four things, it’s officially too complex.
- No more than seven success metrics: Another tipping point could be that once the rep needs to remember more than seven numbers to know how he’s performing, your plan is too complex. The cap on seven performance metrics comes from the psychology behind remembering telephone numbers: Most people can recall a sequence of no more than seven numbers or items, studies have found. Seven metrics may seem like a lot, but if you have three products, each with its own target revenue goal and metric, that’s six numbers already. Add in an overall performance number or rank and you’re at seven numbers that a sales rep needs to think about to assess his own success.
- Applying adequate weights: If a single metric accounts for less than 15% or 20% of a rep’s pay, the rep will ignore it. That means that you need to limit yourself to no more than six metrics so that the weights of each can exceed 15%. Any additional complexity stops providing benefit.
These “tipping points” are all nice places to start, but it’s still important to ask some of your reps to try to explain the plan before you finalize it. If the plan is too complex for them to easily communicate, you’ll need to rethink it. Make sure to choose reps who weren’t involved in the plan design to get an unbiased view. Good luck with keeping it simple.