Sales managers looking to stir things up know that nothing incites open rebellion among a sales team like monkeying with the compensation plan. Yet there are plenty of legitimate reasons to adjust compensation strategies from year to year. As management consultants Jerry Colletti and Mary Fiss (www.collettifiss.com) point out, however, before making any radical changes sales organizations should first realistically assess the challenges they face and then construct targeted solutions. Colletti and Fiss have identified the following seven common symptoms of a comp plan in trouble. If your comp plan shows any of these signs, it’s time to reassess.
1. Marks that are missed.
Whatever your sales goals – whether revenue growth, increased new product sales, gross profit growth, new accounts, etc. – if a third or more of your sales team falls short then your comp plan may be misaligned with the required financial outcomes.
2. Big dogs not barking.
Typically 70% to 80% of revenues come from 20% to 30% of your customers. Sales figures from these big dogs can point to potential problems. If these strategically important customers are buying less this year than last or failing to purchase products designed with them in mind, the comp plan might be part of the problem.
3. Behavior adjusting factors.
Typically, salespeople looking over new comp plans only are interested in knowing whether they can make more money if they adjust their behaviors to match the new business strategy. But other factors also might concern the reps, such as complex incentive rules structures, unrealistic performance expectations, inaccurate sales crediting or mid-year plan changes made without any explanation.
4. Management grumbling.
Frontline sales managers get discouraged when they believe the comp plan is not aligned with the most productive sales activities. Since reps behave according to what they get paid to do, they often will ignore managers who offer directions inconsistent with the comp plan’s design.
5. Exceptions taken.
When a business situation changes, companies naturally make exceptions to comp plan rules to reflect those changes. If the number of exceptions and alterations made this year far exceed those of last year, the problem might be with the plan itself and not the rapidly changing marketplace.
6. Incentive overload.
Sales contests and incentives are designed to provide an additional motivational boost beyond what the comp plan alone can achieve. If you find your sales organization running a bunch of different contests in an effort to drive a varying set of results, you might need to go back to the drawing board and find out why the comp plan isn’t doing its job.
7. Time to change.
Since the business environment does change – and along with it customers’ needs and channel opportunities – companies must adapt their compensation plans to these new realities. If your company has implemented a new sales strategy without reflecting that new strategy in the comp plan, you might be undermining your salespeople’s ability to drive the company’s success.