Simplifying the Sales Compensation Program
By: Dan Ganse, Spectrum Technologies
Author’s Note: This blog looks at possible ways to help simplify the Sales Compensation Program. Simplification can lead to better overall plan understanding and subsequent improved sales execution (higher revenue), as well as reduce overall administration support time (lower costs).
Topic # 1 – Simplifying Mid-Cycle Transfers
Recently, I spent time with a customer discussing and analyzing their sales compensation program. The customer shared with me a recent plan change, a pretty simple change, which greatly reduced the plan administration effort required to support employees in one role.
The role in question was the Regional Marketing Manager (RMM). For this company, the RMM is a sales overlay position – a position that can influence a sale through local marketing events– but not a person responsible for the direct sale of their product. Additionally, the position has a relatively low incentive lever of approximately 20% of the role’s Total Target Compensation (TTC) which, when combined with their high volume sales transactions, translated into relatively low payments on a per transaction basis.
The prior commissioning process was to align the RMM to each sales transaction within their assigned region. However, this company found that the RMMs were people frequently on the move within their organization – and consequently the crediting process (and adjustments to that process) was a source of constant administrative pain.
To ease this pain – the company instituted a quarterly geographic performance metric and managed any necessary proration by adjusting the quarterly target earnings for the RMM. For example, the first quarter’s regional performance was 103% to goal and the RMM was in the field for the first half of the quarter. Instead of looking at the actual transactions from the first half and prorating a goal, to compute some sort prorated attainment that then only applied to this person – the company now takes the first quarter’s performance (103%) and adjusts the target bonus by the 50% eligibility of the RMM.
The RMMs found this easy to understand and welcomed the change. Field management liked the change because it simplified their reporting and underscored the importance of a regional metric. Lastly, plan administrators saw exceptions and complexity drop – shaving a day off a five day commission cycle for the company.
About the Author: Dan Ganse has 20 years of deep expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes assisting customers in all aspects of enterprise-wide incentive management and brings a unique combination of business and technology expertise to address customers’ incentive management issues.