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“Double-Check” the Effectiveness of Your 2014 Sales Compensation Plan Launch
State Farm’s Discount Double Check ad is recognized as one of the best ever use of a celebrity (Aaron Rodgers, QB of the Green Bay Packers). The premise of the ad is to double check to see if you qualify for an insurance discount. It’s the concept of double checking that got us thinking about its relevance to the launch of a sales compensation plan. Research shows that two out of three B2B companies enter a new fiscal year with a new or significantly revised sales compensation plan. Given both the number of companies making that change and the amount of time companies spend on plan redesign, the concept of double-checking plan implementation has a great deal of merit.
Here are five elements of effective sales compensation plan management that should be on your “double-check” list:
- Quotas or sales goals are in the hands of your sellers. Sales people tell us that nothing is more frustrating than receiving a new plan without the corresponding sales quotas (or goals) which are the basis for payout. In companies where there is a lag between new plan launch and final, individual sales quotas, the typical refrain is, “…our sales people understand that they will be expected to sell more…” While that is probably true, our advice is this: make every effort to issues quotas at the same time as new plan launch (and, certainly no later than one business week thereafter); if that is not possible, invest the time and effort to provide each sales person will a projected estimate.
- Performance reports are available now. No measures should be included in a plan that can’t be tracked and reported to participants. This is particularly important when a new measure (e.g., sales profitability) has been added to a plan. Well in advance of the first payout under a new plan, managers should have in hand a complete set of performance reports that are available under the new plan.
- The sales force understands the plan. The degree of plan change typically determines the need to validate its understanding by the sales force. When the incentive opportunity is changed (up or down), measures are added, performance weights are changed, and/or timing of payout is altered, it’s a good idea to conduct a sales force survey to confirm sales people understanding of the plan. This is particularly important if there is an expectation for a material change in selling behavior. For guidance on how to structure such a survey, including illustrative questions, see our book: Sales Compensation Essentials: A Field Guide for the HR Professional, 2nd Edition, WorldatWork, 2014, pp 154-156
- Managers understand how to manage with the new plan. Our research shows that too often companies underestimate the importance of training sales managers in how to manage with a new sales compensation plan. Particularly when performance measures are changed, it is important that sales managers are clear about how to coach and counsel their team to achieve sales success. The best way to insure that all sales managers are on the same page relative to managing with a new plan is to conduct a relatively short (typically 60-75 minutes) training session to accomplish four objectives: 1) Explain the best features of the new of new plan (i.e., what’s changing and why); 2) Equip managers with the tools and techniques to succeed in managing with the new plan; 3) Help managers formulate a plan of action to manage with sales compensation; and, 4) Practice using that plan of action
- Expected business outcomes are understood and agreed to by senior management. Typically, senior management will want to know two things about a new sales compensation plan: 1) Will the new plan result in directing behavior and performance to the desired business outcomes; and, 2) What are the cost consequence of the new plan; will it cost more, less or about the same as the former plan if the same level of performance as prior year is achieved? With that criteria in mind, it’s a good idea to reconfirm with senior management that the expected outcomes under the new plan (that may have been the basis for the plan’s approval to begin with) have been effectively communicated to the sales force and that there is clear evidence of “buy-in” to plan change.