Posted by Paula Crerar on Tue, Jan 26, 2010 @ 11:10 AM
Haven't gotten around to designing your 2010 comp plans yet? You are not alone. Sales execs are telling us that they are busier than they expected. Demand is increasing, sales team resources are being stretched, and there isn't a minute to sit down and come up with new plans.
But if you don't carve out some time now, you'll be playing catch up the rest of the year, and you will leave money on the table. Here's why:
This year promises to bring its own set of challenges and opportunities. Your revenue and profit goals reflect your expectations for 2010. But you won't achieve them if your sales comp plans are designed to meet 2009 goals and conditions.
A new year gives you the opportunity to improve on your sales plans - align them better with your goals, make them clearer for your sales reps to understand. New and improved plans will help inspire trust in management and the organization. And by giving your team clear direction, you motivate your reps to greater achievement.
Great sales comp plans provide a great evaluation and management tool. If you don't spend some time now developing a good plan, you will spend much more time the rest of the year figuring out how to evaluate your reps' performance.
If you are not sure how to get your sales comp plan process started, no worries. Join us for a webinar on February 2, and we'll take you through the process, step by step. With our approach, you'll be creating plans in minutes.
Posted by Teanna Spence on Thu, Nov 12, 2009 @ 10:44 AM
When it comes time to design your sales compensation plans, don't go it alone.
Comp plans created solely by sales executives will emphasize incentives and motivation. Plans designed by finance will be skewed toward ensuring affordability.
The best sales compensation plans balance these and other corporate requirements. So when you are developing your comp plans, get input from multiple constituents to help you achieve the right balance.
One person needs to lead the sales compensation planning process. The leader gathers information, opinions, and advice from other team members, and keeps the project on track and on schedule. The team leader must also determine the approval process and make sure that "sign off" occurs at the appropriate stages of the project.
The sales compensation team should involve the following:
- The CEO: provides key guidance on the company's strategy
- Finance : delivers plan affordability guidelines and sales goals.
- HR : contributes job descriptions, base salary, TTC (total target compensation) and organizational structure.
- IT: delivers transactional data used by the compensation plan and information about the ability to implement the proposed changes to the plan.
- Marketing: presents upcoming campaign strategies that will influence quotas.
- Participants: advise on what worked and what didn't work in the current plans and, towards the end of the process, how they perceive the proposed changes to the plan working.
- Product Management: informs on road map for new releases and new products which can also influence quota.
- Sales Management: analyzes the attainment distribution of the current plans and explains why they may have fallen short or exceeded the goals.
- Sales Operations: provides their analysis of the current plans, as well as territory alignment.
- Legal: reviews plan to ensure that they are in compliance with current laws, regulations and internal policies.
Small companies will find one person on the team may fill multiple roles.
With your team in place, you'll ensure your sales compensation plan is within budget, is primed to motivate your sales team, aligns to strategic goals, and is well communicated across the organization.
Posted by Teanna Spence on Thu, Feb 12, 2009 @ 12:02 PM
Lately, I've been getting variations of the following two questions:
- What do I tell my reps when I change the sales commission rate from flat to ramped?
- How does this motivate them to sell more?
Sales reps don't like change. Many see change as something being taken away from them. Clearly communicating the plan changes will go a long way in motivating the reps to perform on the new plan.
In the examples below a flat commission rate will be compared to a ramped commission rate. The amount being paid at 100% attainment is the same; the method used to calculate the payout is different based on the rates. In each example the Target Incentive is identical.
A flat rate pays out exactly the same amount no matter what the performance is. Each sale is worth the same amount to the rep. Generally it is used for measures that have a low priority. I have also seen this used to keep a plan simple. Keeping a plan simple does not necessarily mean the plan will be motivating.
A ramped rate pays out a higher rate as you sell more. As you move up the attainment curve, the sales commission rate gets larger; the earning capability on each sale is greater. Once the goal is reached, the rate usually takes off. Ramped rates work well when there are not too many tiers and big enough jumps in the rates at each tier to cause the rep to get excited to move to the next level. The rep will see how much more they can make once the quota is achieved. This tiered rate approach encourages and rewards the rep for the extra time and effort it takes to exceed their quota.
A few clients have communicated this type of change recently and met with some resistance. Not surprisingly, the reps that were resisting the change were underperformers and could not see themselves earning at the higher rate. On the other side, their top reps love the additional earning capability as they see themselves exceeding quota.
What's been your experience?