Creating timeline for success
By Joe Clarkson
Despite best intentions, it can be difficult to get sales incentive plans completed and rolled out in time for the new fiscal year. But revisiting your sales strategy and incentive plans regularly is imperative, and keeping a realistic timeline for redesign is key.
A typical review and redesign process can take from four to 12 weeks, depending on the scope of responsibility. The number of business units involved, the complexity and diversity of current plans, and the availability and accuracy of pay and performance data must all be considered. You’ll also want to take into account the need, cultural or otherwise, to engage multiple stakeholders to build consensus and buy-in along the way.
The “We haven’t got time for all of this; let’s just come up with some new solutions” trap is a common one. The temptation to dispense with sound processes in the name of action is dangerous. It’s a lot like taking a road trip without an agreed-upon starting point or destination.
Instead, before beginning an official review and redesign of your sales incentive plan, devise a strategy that will enable you to gather and analyze pertinent data, gain feedback from sales personnel and consider crucial administrative aspects.
This preliminary activity ensures that all the ingredients are already in place; nobody can claim there isn’t time to do all the preparatory work; and new incentive plan decisions can be based on facts, to help evaluate alternatives and select preferred plan options.
These four specific information-gathering steps can prove vital to developing the foundation for your plan redesign.
Get market benchmark data
Find out how competitive your pay levels are relative to the market. Compare your pay levels — base salaries, base salary ranges, target incentives, actual incentives and pay mix — to like-sized company market data. Be careful not to draw any conclusions without considering your organization’s recruiting and retention challenges
Analyze pay and performance data
Pull out last year’s data files. Analyze the relationships between pay and performance to see what results were being driven by the old plan. Consider some questions:
● What do your top performers earn versus marginal performers? How does this compare to the market?
● Which of your plan’s measures are really driving sales behavior? Is this aligned with the strategic intent of the plan?
● Are there situations where sales people have earned high incentives for less than ideal results? Are these instances common or an exception?
● How many people failed to pass threshold and earned no incentive? Failed to meet goal? Exceeded goal and/or earned exceptional incentive pay?
● What implications do any of these findings have for making changes to the plan?
Ask the sales force for input
Gathering feedback from the field about incentive plans might sound like opening a can of worms, but it usually produces nuggets of valuable information that will help the sales compensation manager shape sound opinions. Important insights often revolve around several key questions:
● How well do sales people understand the company’s business objectives and sales strategy?
● Is their role in the overall sales model clearly defined and understood?
● What metrics define how their role is influenced by outside factors?
● Is the incentive plan easy to understand? Is it competitive? How does it affect their behavior?
● Do they have any administrative concerns with the plan?
When combined with the findings of the statistical analysis of pay and performance results, answers to these questions form a strong and objective baseline.
Understand critical support processes
Become familiar with crediting rules (how and when sales credit is assigned to a salesperson), the goal-setting process (performance standards against which actual results are measured) and the plan’s administration process. Problems with any of these can undermine an otherwise healthy sales incentive plan.
Taking these four steps will position you as a valuable knowledge source and speed up the entire redesign process. By getting ahead of the game, you will be positioned to assume a commanding role in the assessment and redesign process when the time comes.
Joe Clarkson is a director of North America Practice for Sales Effectiveness and Rewards at Towers Watson.