Yes, it’s true, your sales reps are going to love their new sales compensation plans just like Jet loves his ice cream!
Sales compensation plan change is stressful and the last thing you want to do is stress out your sales organization at the start of the new plan year. There is a way that you can get your sales reps to at least embrace their new sales compensation plans if not love them! But you must overcome this: they automatically think you are going to take something away from them, raise the quotas, drop the rates, remove bonuses and things like that. So how do you overcome this preconceived notion that something bad is about to happen to the very sales reps you are trying to get motivated for 2017?
Hopefully at this point in the year you have created great sales compensation plans that align with your company’s strategic goals for 2017. As you get ready to roll out your new sales plans it is important to understand how the reps will perceive the change and what you can do to ease the pain. You probably need them to sell more and can’t afford to pay them more, so you just might have raise the quotas. Oh, and to get things to come out right, you did have to drop their commission rates. Make no mistake, if you raised their quota without reducing their rates, you will end up paying more!
I once worked with a company that needed to change their sales compensation plans. Their current plans no longer matched the company’s strategy. These reps were paid a great deal of money and were not bringing in new customers. Their incentive plan focused them on retaining customers, which is important but not to the exclusion of acquiring new customers. Their plans need to significantly change so the company could reach their revenue goals, which included significant growth. Through careful plan design we created different job roles and focused one group on the new customer acquisition. It was critical that this plan was clearly documented so the reps knew what they should be doing.
Regardless of the drivers of the commission plan change, you need to clearly communicate the plan to the reps or they will keep on doing the same thing they were doing this year. Quotas need to be set, measurement criteria clearly defined, commission rates clearly identified and what to do with all those orders that are in process when last year’s plan treated them differently. To do this, you need to have a clear sales compensation plan document. I have read thousands of these documents. Some I understand right away and others it takes even a sales compensation expert like me a lot of time to figure out. Can you imagine how much it will take a sales rep to figure it out? If you leave it up to their interpretation, they will guess based on where they think they will make the most money.
Regardless of the direction the plan change takes it is important to ensure that your reps will make about the same amount as last year for the same effort. This should have been part of your modeling criteria. For example: it you raise the quota, make sure that rep can see themselves achieving quota. If you set the quota unfairly high it will actually demotivate your sales ream. If you instituted ramped rates, that is rates that vary with achievement, have you considered the implications to the rep’s check at the beginning of the year and tried to normalize their payouts with a Q1 kicker bonus?
When reviewing your plan documentation answer these questions clearly and you'll go a long way in communicating your plan changes, aligning the reps actions and achieving your strategic goals!
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.