Get Ready to ‘Game the Plan’
Xactly CEO Chris Cabrera will take the stage at the WorldatWork Spotlight on Compensation conference later this morning with an announcement that we’re so excited about: He’s releasing a book later this year to help organizations make the most of their incentive compensation. The title is “Game the Plan: Every Sales Rep’s Dream, Every CFO’s Nightmare,” with a foreword by former Salesforce.com President and CFO Steve Cakebread.
“Game the Plan” is an engaging and highly readable (trust us, we peeked) look at how to use data to create incentive plans that inspire employees in a way that benefits them and the company equally. “Gaming” the plan is a good thing if it encourages salespeople to achieve peak performance – everybody wins!
Intrigued? Read a few snippets and sign up to be notified of the book’s release at gametheplan.com.
Tips on comp-plan design
Separate but related: Cabrera and Xactly VP Mike DeLeonardis have spent countless hours cozied up with “big data” gleaned from our store of eight-plus years’ worth of anonymized sales-performance information. From their analysis, they came up with the top traps that hamper good incentive compensation design.
We fondly call them “The Seven Deadly Sins of Incentive Compensation.” Here are just a few:
Sin: Misalignment. At the strategic level, most plans do a good job of aligning incentive compensation with business objectives. Alas, the devil is in the details. Take ramped quotas, for example.
It’s fairly common to set lower quotas at the beginning of a sales period, when the emphasis for reps is on building pipeline. Over the course of the sales period, quotas increase. So far so good. The problem arises in companies that already struggle with “hockey stick” sales, where the majority of transactions come at the back end of the sales period. In that scenario, ramping quotas exacerbates the problem by encouraging the sales organization to push deals later into the period when quotas are at their highest.
Atonement: Mapping. Every component of your incentive compensation plan should emanate from a specific business goal. Want to doublecheck? Look at each component – yes, all of them – and run through the exercise of mapping them back to your business objectives to make sure they don’t inadvertently conflict.
Sin: Supposition. Benchmarking is a meaningful way to measure success and gain business insights. Benchmarks are based on data. And if you assess individual and company performance without data, you’re essentially just making an educated guess.
Atonement: You probably guessed: benchmarking. Empirical data goes further than academia or consultants’ research in analyzing incentives. Get an idea of where your company stands by benchmarking against an aggregate group, other companies in your industry, or company goals established at the beginning of the year.
With the right data, you can look at performance from region to region, product to product, and sales rep to sales rep. And if one of those reps gets cranky about your incentive compensation plan and makes noises about leaving, you can pull up the data that proves that you’re right in line with the market.
Sin: Bloat. Your incentive compensation plan is your organization’s way of communicating top priorities. Plans with a boatload of components don’t communicate much at all. Don’t distract your teams with 8, 9, 10 plan components. They won’t know where to focus their time and energy, so they’ll gravitate toward the products they – not you – have prioritized.
Penance: Streamlining. Xactly data shows that the optimal incentive plan has 3 measures. That number strikes a nice balance between individual and company goals. Some complex businesses may need 4 or 5, but employee performance drops markedly when you hit 6 or 7.
For more, have a listen to a replay of our Seven Deadly Sins webinar.
CFO Call to Action: Aligning Sales and Finance
Sales and Finance are notorious for butting heads. Finance makes life difficult with their penny-pinching ways and Sales adds fuel to an already hot fire with their never-ending requests. But the days of contention between the two are numbered. Find out how technology is the solution to bridging this long-standing divide.