article | October 23, 2017
6 Tests to Prevent 2018's Sales Compensation Plan from Being a Flop
This post will help you test a redesigned sales compensation plan to ensure cultural fit. Plus, you’ll find advice on compatibility with other sales effectiveness drivers.
Let’s suppose HR is fully engaged for a redesign of a 2018 Sales Compensation plan. They even brought in an expert compensation firm. The plan looks great – equitable, in line with competition, attractive to sales. But wait – this new incentive compensation plan could flop. That would make 2018 worse than this year! What can be done?
Take the time to test your new Sales Comp plan for compatibility – compatibility with culture and other drivers. At the end of this post, answer questions from the Sales Compensation phase of the “How to Make Your Number in 2018” . Turn to page 395 of the Sales Strategy section.
Compatibility is just one of 20 areas to test against when designing Sales Compensation. The biggest concern of a compatibility test is cultural fit.
Here’s an example of culture going untested:
A CSO of a large B2B sales force was challenged by his CEO to grow the business. So, he commissioned HR to design a new incentive compensation plan (IC Plan.) The IC Plan went from less than 10% variable pay to 30%+ variable pay, with a focus on new logos. But it was a disaster. It failed because the Sales people were relationship builders accustomed to slow growth in existing customers. The sales force did not have the right culture of hunter reps and aggressive sales managers.
More examples of culture misfits:
A company culture strives for collaborative efforts – yet the pay plan requires individuals to be ranked against each other. Will this plan foster teamwork?
A sales force today has unlimited upside potential – a culture of top performers. The new IC Plan institutes a salary cap as a cost-cutting measure. Reps suspect that the CFO must have been involved in that design. Where will the top performers go?
A company’s sales culture is geared around one annual event – President’s Club. Managers do what it takes to get as many people into the club as possible. This brings extra bonuses to managers. What will happen if the new IC Plan raises the qualifiers, or eliminates President’s Club altogether?
Culture at another firm required Sales Reps to do their own prospecting and sales. Most sales were incremental or competitive displacement when prospects were in an active buying cycle. Marketing’s new Lead Generation and Sales Enablement now generated latent buyers. The IC plan was changed to diminish Rep prospecting. Will Reps be able to break their old habits?
Hopefully, the new IC plans for these situations have been well thought through regarding cultural fit. But that’s not the only compatibility area to test.
Here are some other compatibility tests. Any one of these areas could be a land mine that blows up your 2018 sales comp plan
Call to Action
Here are steps you can take to ensure the 2018 sales comp plan will succeed: