Sales Compensation Management Is Tough: 3 Keys to Doing It Well
By: Dan Ganse, Spectrum Technologies
Sales incentive compensation management (ICM) is a tough ballgame and has unique challenges. ICM operates at the intersection of corporate strategy, behavioral psychology, and multiple corporate IT systems.
Managing sales compensation is a continuous process that does not end when a new ICM system is brought online. Good ICM software clearly helps, but there are three critical factors required to effectively manage the sales compensation process.
- Expect change
- Seek continuous improvement
- Staff appropriately
Businesses are always changing and many of those changes have a direct impact on your sales compensation plans.
Events like acquisitions and layoffs impact the sales team size, causing account alignments to change which impact sales quotas; new products are launched and/or abandoned, impacting sales quotas; field sales personnel move in and out of selling roles throughout the year often which has an impact on how those people are goaled, their contest eligibility, sales coverage of their departing territory, and more. The list is endless – but all require the sales IC system to adapt quickly.
It’s critical for those supporting these IC systems to build flexibility into their system and processes to accommodate change. Whatever can be parameterized, should be. Components like quotas, target incentives, commission rates, are easily accommodated by most designs. Policies should be established for common conditions and adhered to.
Larger changes are difficult to anticipate, but should be approached in a structured manner with standard change control procedures. Care should be taken to remove old code / rules / parameters to make future changes easier to make and maintain. When this care is not taken, you are shortening the life of your ICM system.
Seek Continuous Improvement
At the end of every processing cycle, review your processing procedures and be sure to note areas for improvement. Focus on both improving your team’s productivity as well as the field sales org and executive management user experience with better analyses and analytics. Take time to update procedural documents, look to automate frequent manual tasks, and maintain a “punch list” of necessary system changes and enhancements.
Companies all too often fail to appreciate what it takes to manage an IC system well – trusting too much in the tool’s much advertised flexibility. Companies that do this well, acknowledge that this is a specialized skill set and requires people who are adept at managing multiple constituencies and who are able to translate requirements to produce deliverables.
It’s important to have skilled people supporting your IC system, but also to have enough of them. You should have enough staff to produce ‘higher value’ analyses that deliver true insight into how well your sales plan is performing and identify areas to drive your overall corporate performance versus simply managing to produce a payroll file. Be sure to anticipate and address peak staffing needs as well by cross-training beyond your core support team (for example, you can have the person who is responsible for quota maintenance also learn your ICM system).
For a longer term impact, there is an increasing amount of companies who are engaging SPM/ICM professional service firms to help them year round. These firms know the domain, the toolsets, and often provide their own cross training to mitigate your people development and maintenance costs. The more you use a firm, the better they will understand your business and systems, which increases their productivity and contribution.
In summary, managing and improving sales compensation takes considerable focus. Having an approach that concentrates on improving the effectiveness of your sales support operation is critical to its success.