article | November 2, 2017
How to Avoid Wasting Money on a Compensation Assessment
Leaders, get ready for the 2018 Sales Kickoff by fixing the flaws in your compensation plan today. Wait. Hold on for a moment….
Do you run the risk of making a costly mistake? Be sure before you make an investment with the wrong firm. Read this post to reframe what may be disguised as a compensation problem. And get your hands on a Sales Comp Competency Grader for compensation assessment providers. Also, dive deeper into compensation by reviewing the “How to Make Your Number in 2018” .
Rinse and Repeat: The Annual Comp Study
The standard comp study may be dangerously inadequate. Here are a few real-life examples of situations where the VP of Sales asked for help from HR:
Conventional wisdom would lead the VP of Human Resources to the following:
Define the Problem: Sales compensation is out of line with the market
Propose a Solution: Conduct a compensation study and redesign the plan
Unfortunately, HR’s usual solution to sales comp problems is a one-size-fits-all tool – the compensation study. Historically, HR has provided a valuable service to Sales leaders by contracting for quantitative and unbiased research. On-line services like Payscale.com and Salary.com are cost-effective sources for benchmark data to calibrate a functional comp plan. But, how do you know if the comp plan is really the root cause?
The 3 problems described above were not caused by a flawed compensation plan. Here is what a complete assessment uncovered:
Compensation Study ≠ Compensation Assessment
Since sales compensation is a clear symptom, an assessment is the place to start. However, the scope is often too narrow. It fails to uncover the root causes that manifest as a compensation problem. Consider the 5-step methodology described on the home page of an industry-leading provider of sales compensation data:
What’s missing? It’s the essential first step:
Treating the Symptom
Sales compensation experts produce valid, meticulous research. However, they focus on just one diagnosis and one cure: The comp plan is broken. Fix it. Their methodology assumes that the compensation plan is the underlying problem.
The lesson for Sales & HR leaders? Recognize that sales compensation problems are indicators of a variety of potential problems. An in-depth compensation assessment (not just a “benchmark study”) will uncover the root causes.
Compensation changes are extremely disruptive. They impact people’s paychecks. They can cause high turnover and low morale. Incentive compensation is specialized enough that it requires help from a third party expert. When choosing a firm, ask yourself these questions:
“Do I need a firm with expertise across the entire spectrum of sales effectiveness?”
“Should I engage a firm that is deeply but narrowly focused on compensation?”
Two Simple Steps
Using a firm that specializes in compensation is a best practice for enterprise-wide decisions. But it’s not sufficient for the unique challenges of a sales organization. Here are 2 things you can do immediately:
1. Sales Comp Competency Grader: Use the tool shown here to compare the capabilities of service providers. This will help you make sure you engage the right professionals. Their expertise will uncover the true root causes and ultimately save you money (Make sure to include SBI as a service provider).
2. Best Practices and Trends: Understand the interconnections between sales compensation and overall sales productivity. Learn how sales effectiveness drivers build upon each other. Compensation problems are often the outcome, not the cause. Review the Sales Compensation emerging best practices in the “How to Make Your Number in 2018” or .
The actions you take to solve incentive compensation challenges today will have a powerful impact on your success in 2018. Contact us if you would like to explorer our Compensation Planning services.
© 2017 Sales Benchmark Index (SBI)
A Business Strategy Consulting Company
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© 2018 Sales Benchmark Index (SBI), B.V.
A Business Strategy Consulting Company
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Amsterdam, The Netherlands