You made a compensation plan change to stimulate sales activity within the sales team. You’re anxious to see if it has made an impact.
It’s been a few months since it went into effect.
Did it succeed or fail?
This may surprise you, but just because revenue hasn’t risen doesn’t mean it failed. Read on to discover what other indicators you should be paying attention to.
Make sure you are using the right factors to evaluate your comp plan.
How to Determine the REAL Impact of the Comp Plan
It may be too early to identify the full impact of your comp plan. Certain goals require more time to see an impact. Longer sales cycles might not show revenue results for 2 or 3 quarters.
But there are still success indicators you can be on the lookout for.
A higher close rate may indicate that reps have been successfully incentivized. If more reps are closing sales, they are boosting their negotiation and closing skills.
A lower discount rate may also indicate that reps are incentivized. They are putting their sales skills to work and putting profitability first.
SPIFFS are designed for short-term gains. You should be able to accurately measure their performance within the new comp plan.
Service sale rate
Though they often have a lower margin, services are stickier than products. They lead to better overall profitability and renewal rates. A rise in the service content of sales is an indicator of comp plan success.
Compare the number of long-term contracts that renewed this year versus last. An increase is a positive sign.
Later-stage and early-stage pipeline changes
This is especially relevant to slow sales cycles. Look for more deals at the later stages of the sales pipeline. A higher close rate is a success indicator. So is moreearly-stage new logo sales revenue.
How Rep Behavior Impacts Comp Plan Success
Just as your comp plan influences sales rep behavior, their behavior affects your plan.
Are sales reps asking for more pre-deal exceptions? If they are increasingly asking for exceptions – commission percentage for example – pay attention. There may be misalignment between your comp plan and sales rep expectations.
Are sales reps making more post-close commission complaints? If reps aren’t happy with their commission, listen up. It may indicate that the comp plan isn’t easy for them to calculate. Or it may indicate that the comp plan just isn’t working.
Are field reps spending more time with the ICM (Incentive Commission Management) system? Reps need to calculate how much money they will make on each deal. If the new comp plan has complicated this process, reps may be miscalculating. If unaddressed, this can quickly lead to the failure of a new comp plan.
You may notice increased turnover after a comp plan change as well. This doesn’t necessarily mean the plan has failed, though. There are two types of turnover you should pay special attention to:
- Type 1 – These reps will leave while they’re waiting on commission checks. No matter what. You can’t blame the comp plan for them leaving.
- Type 2 – These reps are on the fence about the new comp plan. They start to look for new jobs as soon as the plan is implemented. Pay attention to this type of turnover. An increase might mean the comp plan isn’t meeting reps’ needs.
Use our Sales Compensation Best Practices Guide for a deeper review of your turnover situation. The Guide will help you evaluate your comp plan versus best practices and pinpoint weaknesses. Go ahead and download the guide here.
Be on the lookout for more conflict with indirect channels. Your comp plan may be causing friction if one channel is better compensated than another.
Also, be on the lookout for a rise in customer complaints. For example, reps are too aggressive or they are making promises they can’t keep. This might indicate that the comp plan is incentivizing the wrong behavior. That doesn’t mean that the comp plan is a failure, though. It might mean that some of the reps are a bad culture fit.
At the End of the Day
Don’t panic if you don’t see revenue increase right away. That doesn’t necessarily mean your comp plan has failed. The success indicators in this article may yet point the way to revenue increase.