The end of summer kicks off sales compensation planning season. This annual exercise can be fraught with many potential challenges. World-class sales organizations begin the process of assessing their current sales compensation plans in order to determine if changes are necessary and to align with the company’s sales strategy. If there are any changes to the sales compensation plans, the organization ensures that they have a clear plan to communicate and implement their new plans. Alexander Group has found that implementation success begins with considering five key directives:
- Communication – Communication is an essential component to sales compensation plan adoption. To ensure that the organization embraces the sales compensation plans, designers should establish a communication cadence, which is clear, concise and frequent.
- Alignment – Sales compensation plan design starts with gaining a clear picture of the job roles and responsibilities. Sales compensation plans are a way to communicate to the sellers which behaviors the organization wants to reward. Plan designers need to be sure that any changes align to job responsibilities that may have evolved.
- Motivation – One of the main reasons for a sales compensation plan is to counteract any loss of hope among the sellers. While plan designers ensure that the plans will provide sales compensation for sales performance, the communication strategy needs to clearly communicate how sellers can earn incentive through the new program.
- Measures – Sales compensation plans should include performance measures that the seller has the ability to impact. Additionally, any performance measures included in the plan should be well-defined.
- Quotas – Organizations can design what they perceive to be the best sales compensation plan, but its success relies on the ability to set achievable sales goals. Organizations need to be sure they have sound quota-setting practices to ensure that the sales compensation plan functions as intended. In order to get quota setting right, sales leaders should expect to spend time and effort to allocate goals appropriately.
But there can be a few roadblocks to be aware of as well. A structured implementation plan that considers potential roadblocks is critical to ensure adoption into the organization.
Here are four key roadblocks and ways around them that plan designers should consider:
- Roadblock 1: Attachment To Old Plan – When sales organizations do not make changes or updates to the plan regularly, the sellers can become emotionally attached to the old plan and they may perceive any change as negative.
⇒ Solution: Organizations should communicate regularly on the reason for change and the potential impact of the plan changes on sales. Plan communication materials should provide sellers with examples on new incentive calculations to promote transparency and understanding.
- Roadblock 2: Inertia – Sellers who don’t understand new expectations–
⇒ Solution: Make sure that sellers understand what the new selling expectations are; otherwise, the sales compensation plans will not serve their intended purpose. The implementation plan should also seek to reacquaint sellers with their job roles and responsibilities at a high level.
- Roadblock 3: Clarity – Plans that include performance measures that are unmeasurable–
⇒ Solution: Achievement on performance measures that cannot be backed by accurate data leaves room for subjectivity. Sellers should be able to trust the data source that leads to their sales incentive compensation. Without this, the integrity of the sales compensation plan can be lost.
- Roadblock 4: Complexity – Plans that include overcomplicated plan mechanics–
⇒ Solution: Sales compensation plans should be designed in a way that the seller can easily calculate their incentive payments based on their performance. If sellers cannot understand plan mechanics, there is a risk they will not be motivated to drive results as they won’t understand how their performance translates into sales compensation dollars.
As designers begin their planning strategy, successful implementation will depend on having clear directions and a solid end goal.
To avoid potential roadblocks during the sales compensation plan rollout, plan designers should provide a detailed rollout plan for implementation, including manager training and clear plan documentation.
Contact an Alexander Group Sales Compensation practice leader to learn how to successfully structure your company’s sales compensation plan.
Read more Alexander Group insights on successful sales compensation plan implementation.