Sales Comp Lessons from the WorldatWork CSCP Exam
I recently took WorldatWork’s Certified Sales Compensation Professional (CSCP) exam. It’s a three-hour, 140 question exam covering everything relating to incentive compensation—from total cash compensation (TCC) to mix to leverage to performance measures to sales compensation design.
The test requires that you calculate different commission percentages based on base and excellence pay, identify appropriate risk for job content, and spot symptoms of a poor compensation plan—among many other things.
To pass the test, you must score 75 percent. I got a 71.
There’s something to be gained from every experience. While it was disappointing not to pass, I learned a tremendous amount about what it takes to design an effective compensation plan by going through the process—knowledge that will provide incredible value to my work here at Xactly.
Moreover, in many ways, my ‘failure’ aligned with and reinforced key concepts learned about compensation plan refinement, testing, and assessment, namely:
- You don’t always get it right the first time
- You need data to make corrections and improvements
- You must frequently reevaluate your approach
You Don’t Always Get It Right the First Time
In studying for the exam, I learned that it is extremely rare that an organization gets the sales compensation plan right the first time. As global sales management advisor Joseph DiMisa explained in a Sibson Consulting compensation prep course, “Simply rolling out a plan and expecting it to work is relatively naïve.”
On top of compensation plan design and performance issues, strategies and organizations also evolve, requiring plan changes and adjustments.
What’s important is to understand why a comp plan might fail. To do so, you need the ability to spot the symptoms of a problem plan, such as:
- Missed business objectives
- Customer churn
- Difficulty in attracting/retaining reps
- Cost of sales higher than budgeted
All of these things can be signs that there are problems in your plan—and that the plan requires further attention and investigation into potential causes. Maybe the objectives weren’t clearly defined; you didn’t have the right mix of pay for the type of sales job; or you didn’t do enough advance financial modeling.
You also need to evaluate the compensation plan from two viewpoints. What an employer considers an effective plan isn’t necessarily the same as that of an employee. Organizations want to ensure the plan drives the desired behaviors, whereas employees want to be paid at the expected level, for example.
You Need Data to Make Improvements
To identify whether a compensation plan is working or not, you need to assess two areas of plan effectiveness: contribution to business success and validation of structural design.
Data is crucial to do both.
As I reviewed the Sibson materials, I couldn’t fathom how this assessment could be done without a solution like Xactly. Without fast and easy data access:
- How could you see if your pay levels are competitive with industry peers?
- How could you quickly compare reps’ range of earnings?
- How could you compare your approach with best practices?
- How could you know if your turnover is higher or lower than average?
While surveys can be done and consultants retained, the cost to do the analysis can be prohibitive. They also take time. By the time you get the results back, the data may no longer even be accurate.
The value of Xactly Insights became increasingly clear to me as I prepared for the exam. With Xactly Insights, our customers can instantly compare their performance against peer groups across 28 different metrics. This short video shows how Xactly Insights’ benchmarking capabilities can help businesses gain a competitive edge through incentive comp.
Likewise, in retaking the WorldatWork CSCP exam, it’s important for me to understand my mistakes, so I can learn from that data.
Download the Executive Summary "Commission Expense Accounting under ASC 606 (IFRS 15)" to learn how to prepare for the new standards.
You Must Frequently Evaluate Your Approach
The compensation plan needs to be modeled prior to adoption—as well as frequently reassessed for performance following implementation. It is not a one and done deal. It’s a living document that required continuous reevaluation in order to ensure the success of your incentive compensation program.
There’s value in getting your incentive plan right. Studies have found that incentives can increase performance up to 22% and productivity to 30%.
According to WorldatWork, organizations should test for plan effectiveness immediately after implementation and every year after at a minimum. Completing an assessment can also take time. I was surprised to learn that it can easily take a minimum of 10 weeks to do an assessment and as long as six months.
When you’re doing an assessment, it must be focused on facts and analysis. You can’t assess a plan’s performance based on a perception or gut feeling. The job content for each position; the performance to attainment goal; and your competitive pay data are all part of the facts.
Sales management typically leads the assessment, but human resources and finance are also part of the process.
Persistence is Key
In all endeavors, persistence is key. I fully intend to take the WorldatWork CSCP exam again.
However, even without the official certification, I know that I’ve gained considerable knowledge from having gone through the initial educational process—which I’m already applying in what I do today.