Are you planning on using those old sales compensation plans again?

Too often I talk with companies only to be told, we’re not changing our sales commission plans next year as change causes so much turbulence in the sales organization. Or they work, why should I change them? Or worst of all, I don’t have time to think about it, too much to do to bring this year’s revenue in!

I sometimes agree with them, that no real change is needed for 2017. If it really and truly is working, then just make sure your strategy hasn’t changed and you should be fine: that is your company strategy, your sales strategy, your organization, your financial goals, your employee goals remain the same as 2016. So how do you know if you’re in this lucky group?

  • The strategy is the same as last year

  • You are on target to meet or exceed your 2016 sales goals

  • Your reps are paid appropriately for their performance

  • Your cost of sales is in line with the budget

  • At least 60% of your reps are at or above quota

  • Your turnover rate is acceptable

If all the above statements are true, you can stop reading this blog now! For the rest of you, let’s get started! If you are working with old ineffective plans, sorry to tell you that next year’s results won’t be any different unless you change the sales compensation plan. When you have a sales team that is operating way below their quota you will miss your revenue numbers. When the reps aren’t being paid appropriately, they’ll leave if they can.

But the biggest culprit I see is that companies don’t match their sales compensation plan to the company’s strategy. Too often to count, I have reviewed sales compensation plan documents that were created at another company! These offenders have yet to realize the predictable relationship between the company’s success and their sales compensation plans. They tend to think of commissions as just an expense item and not something that drives business results.

If you aren’t planning on changing your sales commission plans for 2017, you may be fooling yourself. You need to know when it is time to make a change. If you answer no to any of these questions, it is time to change your sales commission plans!

  • Are you still the same company?

  • Is your go-to-market strategy unchanged?

  • Is the current market condition the same?

  • Are you selling the same products?

  • Are your territories defined in the same way?

  • Do you have the same job roles?

  • Is your planned Target Total Compensation (TTC) unchanged?

  • Have your sales reps been paid appropriately for their performance?

  • Are at least 60% of your reps on target to make quota?

You should evaluate your sales compensation plans at least quarterly but change when truly necessary. Each time you change a sales commission plan there is a little unrest in the sales organization as it adapts to the new direction set by the new plan. Limit sales compensation plan changes to annual unless there is a major event that invalidates the strategic assumptions the plan was based on.

6 keys to a successful sales incentive compensation plan:

  1. Strategic alignment with the company’s goal

  2. All measure must have a quota, goal, or expectation that is aggressive yet realistic

  3. Job roles and territories must be clearly defined

  4. Communicate with detail plan documentation

  5. Provide sales measurement detail information and compare against goals

  6. Reward with accurate and timely commission payment

When was the last time you transformed your sales commission plans? I hope it wasn’t 1937!