This time of year, many companies are thinking about their sales compensation plan design for next year. The design process often involves a number of internal discussions and some feedback from field managers or sales reps. There are a number of questions that compensation groups will ask during this process:
- How motivating is the plan?
- Do you feel the plan is fair?
- Does the plan tie to the brand strategy?
- Are we rewarding performance?
- And so on …
One of the great things about sales compensation is that everyone has an opinion. If you ask the questions above, you will receive a plethora of feedback. However, much of it can be meaningless unless you first ask the following:
- Do reps understand the compensation plan?
If not the most important question, this is certainly the first question that should be asked. If reps do not understand the plan, then all of the above questions become much less informative. How can someone who does not understand the plan comment on its motivational impact or fairness? Would anyone really know if it was tied to strategy? If the sales force does not understand the plan, then they are unable to link their bonus to their performance, thus breaking an important link in the selling motivation cycle. In fact, one could argue that if the plan is not understood very well, then reps are viewing it as a random drawing, which besides devaluing the compensation plan, could spill over to other culture or morale issues.
If you do learn that the sales force does not understand the plan, redirect the discussion or interview to what could be done to simplify or better communicate the plan. Save questions on motivation, fairness and pay for performance for later.
Best of luck!