7 Tips to a Successful 2014 Sales Compensation Year
2013 has come and gone, which means new 2014 sales compensation plans will soon be rolling out. Whether you are modifying your current plan or creating an entirely new one, be sure to keep these tips in mind to save you from a potential headache.
1. Align the sales compensation plan with corporate goals and strategy.
The key objective in plan design is to ensure your sales compensation plans align with corporate goals and strategy. A well designed compensation plan embodies the strategy of the organization and drives the right sales behaviors towards the corporation’s business goals.
2. Evaluate the current compensation plan’s effectiveness.
When designing your new plan, it is helpful to determine what worked and what didn’t in last year’s plan. Some questions you should consider while evaluating your plan: Are your territories balanced? Does your quota attainment plot a standard bell curve? Is sales turnover higher or lower than expected? Do you have the ‘right’ kind of turnover (poor performers leaving) or the ‘wrong’ kind (high performers leaving)?
3. Use simple and objective measurements.
The best plans are those that are simple and easy to understand. The more complex a plan is, the less effective it can be. For instance, a plan that includes four or more measures is usually too complicated and may require the need to define another sales role. Avoid complexity by setting individual and/or team-based measures as appropriate for each role. These should align with corporate sales goals that focus on aspects such as margin, profitability, new customer acquisition, new product introduction, etc.
4. Define policies.
Your plan should be clearly outlined and defined. Develop clear and absolute policies for crediting, adjustments, liabilities, windfalls, etc. There should be no surprises.
5. Model the plan.
Model your compensation plan to evaluate the impact at both the macro (plan cost) level and the micro (individual earnings) level. Make sure your plan fits within budget parameters and adequately rewards your top performers.
6. Follow a formal process to communicate the new plan.
By now, you should have the structure of your 2014 sales compensation plan. Avoid any confusion or worry that may arise by allocating adequate time to roll out and explain the plan to your sales team. Highlight major changes from the prior plan year with a “What’s New” summary. Be sure to train (and possibly certify) first-line sales managers on the plan(s) because they will be the first to field questions from your sales reps and will need to be able to reinforce the plan details (and the corporate strategy) with their sales team.
7. Monitor the compensation plan.
Once a sales compensation plan goes live, be sure to establish ongoing processes to continuously monitor your sales compensation plan’s performance. Be prepared to make mid-cycle changes as strategies change and/or unexpected events occur that require plan adjustments.
Sales Performance Management (SPM) software can be extremely helpful with ongoing monitoring as well as enable faster implementation times when changes are needed.
When you look at the right things when designing and administering your sales compensation plans, you’re more likely to reward the right sales behavior and achieve the corporate sales performance you want.
Make it a good year!