Sales Compensation Programs and Practices

According to a WorldatWork survey, Sales Compensation Programs and Practices conducted in 2010, 80% of survey participants indicated that they used a "hybrid" sales role. This is a role that incorporates responsibility for both new and existing business accounts. They go on to report that less than half of the respondents reported using specialized sales roles for new and existing business, commonly referred to as hunters and farmers.

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Top 10 Things to Consider when Designing Sales Compensation Plans

1. What behavior or results are you trying to influence? Different sales roles and different sales cycles will benefit from different influencers. 2. What metrics are the best measurements of achievement of these results or behavior you are seeking to influence? 3. How many metrics do you really need, and at what point do several become too many? There is a diminishing effect of influence when there are too many metrics or components to a compensation plan.

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Fix the Comp Plan Fix the Company! Not so Fast!

Sales Compensation Plans and especially Sales People can be the “squeaky wheel” that gets people’s attention first.

Sales revenues down? Change the Comp Plans!

The competition is taking us to the cleaners? Change the Comp Plans!

I see this in many cases turns out to be a symptom of other things that need attention. The comp plans may still need fixing as well, but they are not always the root cause of the problems.

Measurable & Attainable

Sales data, especially data which may come to you from a business partner in the form of POS (Point of Sale) data needs to be checked and "cleaned" before you use it to calculate commissions. This process should include verification that they are using your part numbers correctly, checking that any address information is consistent (i.e. state and zip match), along with other relevant checks.

For a sales compensation plan to be successful it needs to be both measurable and attainable. You can have the best of intentions, but if there is a problem with the data, quota or reporting tools you may be limiting your sales potential.

Measurability can be influenced by many factors including the reliability of your internal sales data reporting, external sources, and timing. If you rely on multiple business partners for sales data what happens when one or more reports are late or incomplete?

Sales Compensation Puzzle (2,000 Pieces, Choking Hazard)

There are a number of Key Elements to Compensation Design. Here is a check list to be sure you are not overlooking any important elements:

• Alignment with Objectives
• Best Practices
• Commissions
• Compensation Software
• Contests and SPIFFs
• Data Accuracy and Availability
• Legal Considerations

• MBO/ KSO
• Plan Design and Policies
• Plan Documentation
• Quota Setting
• Regulations
• Territories and Channels