By Eugene So
Senior Content Writer
As you consider upcoming sales compensation plan changes, maybe your company is ready to be liberated from the ancient tools handicapping your sales efforts to a mindbendingly slow pace. However, automation is not necessarily the answer to all sales compensation problems – in fact, a new shiny tool could be a huge investment that only helps the company make the same mistakes faster. Take, for example, a bakery owner who recognizes that he’s losing money selling cinnamon rolls. He may upgrade to a shiny new machine that speeds up the cinnamon roll-making process in order to increase the margin on cinnamon rolls, biting the bullet on the investment of purchasing the technology and training the bakers to use it. However, if the recipe is the root issue, not the time it took the make the rolls, then the effort would be futile. Likewise, if you’re upgrading to a new tool and putting in a new system to create operational efficiency, it should also be an exercise to review current processes and evaluate root issues to create an overall agile sales process.
Take a fresh look at your sales compensation processes before considering the investment of a new tool. Key questions to ask include:
- How easy is it to change the comp plan? According to a study from WorldatWork, best-in-class companies have three or fewer measures for sales compensation calculations. I once worked with a client who tried to explain the “John plan” to me, built for the specific employee – John. If the system needs to be configured for each individual, making plan changes a difficult and manual process, it should be reevaluated. With an out-of-the-box solution, comp plans can be standardized while also remaining flexible for each individual’s selling style and product mix.
- Do your sales staff understand the comp plan? Ultimately, you are trying to drive sales behavior, so sales plans must be easily understood while clearly directing sales behavior. Considering industries with high churn rates as well, the framework of the comp plan should be flexible enough for new hires to understand and begin operating right out of the gate. Create focus groups to gain an understanding of how sales staff view the comp plan, as well as the technologies and processes in place to implement the plan, in order to lay the groundwork for considering and communicating a new plan.
- How many adjustments do you need to make per pay period? Calculate the average adjustments that are needed in order to make the comp plan work. How frequently do payments need to be changed, and how much set up is needed each month to readjust for the previous pay period? Find the source of these adjustments and the rules in place to address them. Best-in-class companies aim for fewer than 5% of the sales team receiving adjustments each pay period.
- What are the things that have “always been done that way”? Take a pulse through focus groups with your sales team to consider what are outdated or unwieldly processes that salespeople and sales managers don’t feel empowered to change.
As a solutions architect, I have seen companies forgo process evaluation to dive straight into a solution implementation, only to find that carrying over existing processes would unnecessarily cost huge amounts of time and money. One client I had was a large consulting firm in London that asked my team to build a massive piece of data integration logic for the new SPM system they were implementing. In effect, the logic would carry over balances for commission adjustments for the past three years for every salesperson in the firm in order to pay the correct current commissions. This demand would triple the testing efforts for the implementation and significantly increase the cost of the implementation. However, as we began the strategy piece, we found that this piece of logic would solve a problem that only happened once every thousand transactions. In the past, this was built into their spreadsheet system in a very complicated formula and tracked manually, but it was not a necessary piece of the incentive compensation process. From this discovery, there was a good amount of backtracking necessary to evaluate old processes before moving into implementing the new system.
If you are ready for a fresh start to your sales compensation system, start by evaluating your processes before considering vendors for a potential solution.
This blog is reposted with permission – originally posted on the OpenSymmetry blog.