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Don’t ask me this about sales compensation


There were a lot of holiday gatherings this year and friends talked a little bit about business and a lot about other things. At more than a few gatherings I was talking with C-level executives who are facing some challenges going into 2018. After a glass of wine, the conversation would sometimes turn to questions about how they should structure their sales compensation plans for next year.

First of all, let me say, never take business advice from anyone that does not have a solid understanding of your business! It’s like asking a random financial advisor what to do with all the money in your retirement fund without discussing your goal and financial risk strategy in detail first.

These people all had real problems and thought carefully about what to do. The key word here is thought! They really hadn’t done any analysis. They were busy with 101 other year end things and sales compensation was just one of them.

They wanted my thoughts on option 1 or option 2. I instructed them to toss a coin for the answer. That’s right without following the proper process they stand a 50/50 chance of improving things with either option or with doing nothing at all.

There is a process that needs to be followed to design the best sales compensation plan for your team. The process is part diagnostics, part analysis, part strategy, part tactical. Ever aspect of sales compensation you think you know is evaluated. You look at sales motivation. You look at sales process. You pick apart the sales strategy until you uncover the real measurements criteria, then assign realistic quotas, goals or expectations for those measures. You weight the incentives to drive the behavior you need for success. Every step of the way you are making tradeoffs and evaluating the effect of each assumption and you continue to re-evaluate all your assumptions until the plan is designed the way you think you need it. Then the fun starts! You start modeling different scenarios where you vary your assumptions to make sure the plan is really working as you assumed.

Creating a sales compensation plan is no small task. Your team thinks they can go it alone, use last year’s plans with minor modifications, copy from another company or use a sample plan.

Everyone wants an immediate solution, just like they want to lose those holiday 10 pounds in a week and get frustrated when it takes a few months! Just like weight loss, there is no quick solution to solving your business problems. But follow the process and you will see results.

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