Are you planning to make changes to the 2020 sales compensation plan? You probably will. In fact, 90% of all companies make some type of change to the sales compensation program at the start of the fiscal year. Most of the changes will be minor; however, about 15% of all companies will conduct a major overhaul to the sales program. Minor changes include tuning the performance measures and the payout rates. Strategic goals will be changing for the sales force in 2020, and sales compensation designs need to align performance measures with these new objectives. Meanwhile, the payout rates also might need to change: 2019 payouts might have been too stingy or too generous. Regardless, adjusting the formula math is a common annual task.

What about major changes? Mergers and acquisitions, new products, new channels, a major corporate strategy shift or a redefined customer coverage approach require a full review of the sales compensation plans from top to bottom. No major changes this year? Don’t relax yet. Be cautious of sales compensation plans aging in place. Over time, your products, customers and objectives change, but your pay plans may not have. Oops. Needed changes can be held back by legacy beliefs, fear of field force disruption or a management hostage scenario. Sales compensation plans based on historical artifacts or fear to change will make the situation worse.

What Should You Do? Four Steps
We are entering fall: Rally the sales compensation design stakeholders, including sales leadership, finance, HR and product management. Get sales operations and commission accounting on board too. Now is the time to prepare for 2020 sales compensation design updates. Identify accountabilities, specify a time schedule and execute these four steps:

1. Assess: Find out what you are currently doing and provide a summary of your understanding.
2. Align: Meet with senior leadership to confirm the job and performance expectations/outcomes.
3. Design: Use a task force of key stakeholders to devise new plans.
4. Implement: Prepare plan documents, PowerPoint presentations and manager training kits.

Don’t forget to tune-up the quota system, sales crediting and territories and account assignments. Test and cost the program for preferred intentions. You should have your new designs ready to go at the end of November. Make sure the IT folks can update the payout system and reporting.

Make 2020 the best sales compensation year!

Learn more about Alexander Group’s sales compensation practice. Contact a practice leader today.
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