Sales Compensation Blog

I have read thousands of sales compensation plan documents over the years. Some I can understand but others take even a comp expert a lot of time to figure out. This is the time of year when many new compensation plans are announced to the sales force. In this economy, lots of companies are changing their comp strategy and no company can afford the lost opportunities that can happen when a sales plan is not clear.

When reviewing your plan documentation answer these questions clearly and you'll go a long way in communicating your plan changes!

1. Can the rep see how much they can earn at target?

• The rep wants to quickly look at the plan document and figure out what he can earn when he achieves his goals.

2. Does your plan document clearly communicate the goals?

• Goals must be clear and precise. The rep needs to know where she should be focusing her attention.

3. Does your plan document clearly communicate the earnings?

• If you have designed your plan correctly, the reps greatest earning capability will be on the area you want them to focus. Let them know where that is.

4. Do the reps get excited about the upside possibilities?

• Let the reps see how much they can make at excellence, it goes a long way towards overachievement.

	By using Makana Motivator, you are quickly able to create plan documents that will help focus your sales reps on the right behavior. Goals and earning capabilities are clearly stated.
By using the mini modeling function of Makana Motivator, you will be able to interactively show the rep how much they will earn at various levels of attainment and compare it to what they made on the previous plan. As you review the plan with the rep and change your attainment assumptions, Motivator will calculate the appropriate payout based on the plan you created.

• 18% of companies surveyed will change incentive opportunities
• 12% will increase their emphasis on profits
• 38% will change performance expectations

And according to The Alexander Group's, "AGI Sales and Marketing Benchmark Reports, Guide to Sales Compensation Survey," 93% of companies surveyed will make changes to their comp plan

But, rebuilding or even worse, starting a comp plan from scratch can be scary, especially if you are looking at an empty Excel spreadsheet. But Makana has an easy self- service solution that is available online.

Join us on February 19th to learn how AutoSmart America, an auto dealer in downtown Detroit, used Makana to rewrite comp plans that motivated sales teams and increased revenues.

Is your compensation program too expensive? Your CEO probably thinks so. Have you allocated too little for incentive pay? Your reps probably think so. You feel like you can't win! It is a delicate balancing act, but it is possible to add a little ‘science' to the process.

It starts with understanding your company's overarching compensation philosophy. Your philosophy will depend on how you hire and grow your employees. For example, your company may want you to pay top dollar to hire the best and be in the 90th percentile of pay. Others may want to fall directly in the center of the range - i.e. 50th percentile of pay.

Next, you need to find reputable sources for compensation data. Getting details on sales compensation is harder than general compensation. There is a plethora of firms offering statistics on compensation data but you really need to read the fine print to be sure it covers sales. They range in price from $500 - $6000 per year.

The most important things to look for are:
• What industries are included?
• What job roles (read the descriptions)?
• Do they have statistics on sales compensation? At a minimum, you should be able to get target total compensation and the salary/incentive mix.
• Can you segment the information by geography and company size?
• How fresh is the information? Do they only update once a year? Or is it ongoing?

Best practices recommend you pick 2-3 sources because the level of quality across all job roles can vary even within one source. Here are a handful of favorites for High Tech. All cover sales roles in sufficient depth:

It must be the season for comp plans because Makana has been busy. We keep a finger on the pulse of the sales compensation industry with various tracking mechanisms: LinkedIn notifications, Hubfeeds, & Google Alerts. In the past week Makana has found the following articles that we found interesting. Some were so interesting we had to comment:

Building Productivity, Creating Direction & Rewarding Change

The "Highly-Leveraged" Pay-Plan. A Right-Fit For The ToughEconomy?

Sales Compensation: It's Not Something You Can Learn In School (Let Software Help)

To boost revenue, change your sales compensation plan

How to Fix a Sales Compensation Plan

It sounds like people, as we suspected, are struggling to find the balance of a fair and profitable plan. It is not an easy thing to do, but Makana has quite a few tools that you can use to help with the process including: sample plans, best practices in sales comp webinar, white papers and surveys to help you get started. Check them out when you get the chance, and if you have any more suggestions we would love to hear them!

On my first Web Seminar yesterday we had 16 questions and they were still coming in 30 minutes after the scheduled end time. These weren't the "what's the dial in number?" questions, they were the "how can I drive results" type questions. I guess it shouldn't have surprised me, because while polling the audience we learned that 2/3 of the attendees needed to have their compensation plans completed by the end of January. That's only 11 business days away! No wonder people were so attentive.

While listening to Liz and Teanna, two of our on-staff sales comp experts, talk about comp plans and especially during the Q&A portion of the web seminar, I suddenly realized that it's a lot harder than just taking a percentage of revenue and paying it out to your sales people. There are people trying to develop team plans, develop different plans based on what products are sold and trying to manage accelerators. And it explains why 87% of attendees were still analyzing, modeling and designing plans. I remember being in sales and those weeks of waiting around for my comp plan. In the mean time, I know I wasn't motivated to do much, because as Liz described in the webinar, sales people are motivated by money and if you don't know you are getting paid, you aren't motivated to get the deal done. On average we got our completed comp plans 4-6 weeks into the quarter. And they re-did them every quarter. And senior management would sit down and review each one. At the time I was just irritated it took so long, but now I understand why and know that it can be better.

It's great to know Makana has a solution that saves time, makes sales people more motivated and in the end helps drive the company strategy versus just unloading product.