Is your sales compensation plan working? How can you tell? Now is the time of year many companies must begin considering changes to the sales compensation program to prepare for the new calendar and fiscal year. The sales compensation program frequently becomes out of date due to market dynamics and changes in company business and/or sales strategy. Over 90 percent of companies make some changes to their sales compensation program every year. Is your company experiencing any of the common signs warranting changes to the sales compensation program?
Signs of Failure
Do you see any of these signs within your company?
If your company is experiencing one or more of the above scenarios, it may be time to evaluate and update your sales compensation program.
Signs of Change
There are also several company and market dynamics that signal the need for plan evaluation and redesign, including:
What Makes Plans Work?
The key is alignment. It starts with the company strategy and sales strategy. Strategy drives job design. Sales compensation plans follow jobs. There are many variables at play and many voices in the mix. Good sales compensation plans help motivate the sellers to perform in a way that achieves success for the customer, the company and their pocketbook. When sales incentives tilt too heavily in any one direction, problems arise. Tilt them in favor of the company, and sellers may not earn enough. Tilt them in favor of sales representatives, and customers and sales costs increase while margins decrease. Tilt them too heavily to both the company and sales people, and customers can get burned. Consider, for example, the recent situation at Wells Fargo where a poorly designed and managed sales incentive program led to overly aggressive bundling and cross-selling.
The first step involves assessing the current sales compensation program. Gather internal data on company objectives, pay philosophy, pay and performance analysis, sales budget, and sales representative and management perspectives. Next gather market data on pay practices for your industry. Finally evaluate your plan designs against best practice. Invest the time to conduct a thorough assessment. Doing so provides leadership with needed perspective, so they can determine the design objectives and direction for the new year.
Learn more about conducting a thorough assessment of your sales compensation program.
Speak with an Alexander Group consultant about your sales compensation program.
Original author: Paul Vinogradov