For many companies, sales representatives’ efforts drive revenue, and the sales compensation plan rewards their success. It’s no surprise, then, that changing sales compensation plans can be disruptive and unsettling for sellers. Modifications to the sales compensation plan, while necessary to ensure strategic alignment, require thoughtful rollout solutions.
Sales personnel often greet new plans with suspicion and sometimes open negativity. Sellers fear they will have to work harder to earn the same or less money in the coming year — even when the new designs don’t hurt sellers’ earnings. In periods like this, it’s important to use a proven approach to reduce risk and maximize the chance of successful adoption of the new plan.
- Start early. There are multiple activities and work streams across the organization that need to be completed to ensure a successful rollout. Start early to allow time for proper design, socialization, analysis, iteration and communication.
- Create a sales compensation design team. Sales compensation plans help align an organization’s strategy and sales rep behavior. A sales compensation plan requires input from multiple functions within an organization. Form a team with representation across the organization to gain critical feedback to help guide plan design.
- Conduct cost and individual impact analyses. The plan should be equitable for the organization and it needs to reward sales reps for their efforts. Conduct a cost analysis to estimate the aggregate cost of the plan based on varying levels of business performance. In addition, conduct an individual earnings impact analysis to understand how sales reps’ compensation may vary using historical performance under the new plan. A new plan naturally means that some sales reps will earn more and others less. Some sales representatives may be inclined to exit the organization if they feel they will not be fairly compensated in the coming year.
- Socializing among key stakeholders. Review plan design with key stakeholders. It’s important to include representation from functions such as sales, HR/sales compensation, finance, product, marketing and sales operations. A successful plan should meet the needs of key business functions.
- Create plan calculators. Create plan calculators in preparation for the communication phase. Plan calculators allow sales reps to estimate earnings based on projected performance and quota for the upcoming year. Test the calculators rigorously based on all selling scenarios. Be assured: Sellers will make good use of the calculators to estimate potential earnings.
- Assign governance responsibilities. Assign ownership of sales compensation governance to groups or individuals within the organization. Some examples include crediting/payment processing, quota/pay adjustments and dispute management. Allow time for individuals to learn new systems or responsibilities.
- Test systems. Test software or systems associated with sales compensation administration in advance of plan rollout. Conduct simulations to allow time for troubleshooting, if necessary.
- Create the communication plan. Take a multi-step approach to communications. The communications plan should identify a specific messenger, audience, message and method for each meeting. Early stages of communication should be high level, with subsequent meetings incorporating additional details. Begin communications with a message from the design team to sales management and end with one-on-one conversations between sales managers and reps.
Key communication considerations include explaining:
- Why are we changing?
- What is changing?
- How will it work?
- When will it go into effect?
- How should sellers change the way they operate?
- How will this impact sellers’ pay?
- Follow up. After launching the plan, create focus groups and ensure sales managers conduct regularly scheduled one-on-one meetings with sales reps. This is a pragmatic way to gather continuous feedback, and it allows managers to actively coach sales reps to maximize their return on the new plan.
Following these nine steps will help ensure alignment and create a positive change within the organization as it transitions from one plan to another.
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