Did you effectively communicate your sales compensation plan?
July 20, 2016
I have read thousands of sales compensation plan documents over the years. Some I can understand but others take even a sales compensation expert like me a long time to figure out and some I never can. If your sales reps don’t have a clue what you plan is telling them to do, you’ll get what you get and not necessarily what you want. This will translate into things like missing your sales goal or increased expenses, etc.
At this point during the fiscal year you can learn how effectively your sales professionals understand their sales compensation plans by gathering data. When reviewing your last year’s roll out process and current plan documentation in preparation for next year answer these few questions to understand how effective your communication plan was. If there is really a misunderstanding of this year’s plan there is still time to issue clarification documentation and conduct training sessions before this year’s revenue falls off the cliff.
Is your company’s revenue on target?
Are your commission expenses within budget?
Are your sales reps selling the desired product mix?
Is the discounting within budget?
Does the sales rep understand how much they can potentially make on this commission plan?
Do the reps get excited about the upside earnings possibilities once quota is achieved?
Can your sales reps easily project what they can make on a particular sale?
Can the reps run various what if scenarios to estimate period and annual earnings?
Does your plan document clearly communicate the goals?
Do your reps see themselves reaching their assigned quotas?
Do the sales reps see how they are tracking against their quotas?
Are at least half your sales reps at or above their year-to-date quota?
Is it clear to the reps what counts towards quota credit and how that value is calculated?
Do your reps understand when the next tier in the commission rate structure kicks in and how much more they have to sell to reach it?
Did you answer all these questions with a yes? If you answered any question with a no, it is time to delve a little deeper and uncover the underlining problem. If the problem is significant it is not too late to make a midyear correction in your sales compensation plan. If it is a relatively minor problem, consider this learning when creating your next year’s sales compensation plan.
Whatever you do, don’t just copy last year’s commission plan document and change the dates! A carefully documented and communicated sales compensation plan will go a long way to help your company achieve its goals, retain your top sales reps and motivate the entire sales force.