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6 People You Should Invite to Your Incentive Compensation Planning Party

Incentive compensation planning failure happens largely because there are too many people involved. Here are the 6 people you need on your planning team.

7 min read

Besides the busyness of the holiday season, this time of year is also renowned for two other things—parties and planning. So why not combine the two by referring to your ‘incentive compensation meetings’ as a ‘planning party’?! 

We know what you’re thinking….they are really pushing it comparing a party and my planning meetings. However, when you think about it, there are quite a few similarities between the two. They both require topical conversation, snacks and refreshments, and most importantly, the right guest list. While your ICM discussion will focus more on plan specifics, metrics, and having the right people from each department at the table than your average holiday soiree. If done correctly, the planning process will include discussions about the important stuff: money, quotas, goals, territories, and more! 

When you think about it, most incentive comp plan effectiveness tends to breakdown early-on in the year. This is due to companies failing to invite the right people into the conversation early on—which results in a massive gap between sales compensation plans and company goals. In this case, the sales department is marching towards arbitrary goals they think will equate to success (i.e. a 10-percent increase in revenue overall), while the larger company may be headed in a different direction altogether (for example, revenue increase that comes specifically from a new strategic product line).

Who gets a seat?

So, how do you know if you have the right mix of attendees for your incentive compensation planning party? Here are the six groups you need represented to ensure better alignment in your plans:

1. Sales Leader

A senior representative from sales (VP or Director) is the person best connected to both company goals and staff capabilities. Having representation present for your sales reps is crucial because this is the group of people who will have their boots on the ground physically executing these plans. This ‘party guest’ can help keep your plans grounded and make sure goals are rooted in reality and map to department hiring and resources. 

2. HR

The HR department often owns the overall compensation strategy and philosophy for the company. They are the voice of your employees which means they are responsible for ensuring fair pay and compensation throughout the company. This ‘party guest’ will bring benchmarking and market pay data to the conversation, as well as current employment, regulatory, and fairness issues.

3. Finance

CFOs and other finance leaders have a huge stake in ensuring that the appropriate measures for sales compensation are set since sales comp is often one of the biggest line items for corporate spend. Additionally, sales compensation can materially impact the bottom line of a company. If not managed by united sales and finance teams, the planning process can fail before it even takes off.

4. Marketing

This ‘party guest’, preferably a senior representative, has a long-term perspective on the company's products and services in mind. For example, a marketing director, knowing that the company is launching a product or expanding into a new market, might see a problem with a compensation strategy you are building out. If you don't take this into account during the planning stage, you'll suddenly be reworking and doing plan add-ons after the fact.

5. Comp Admin

Compensation admins can provide input into the ease of set-up and maintenance of a proposed plan. While this shouldn't necessarily drive plan design, the idea of complexity and automation potential is important to keep at the top of mind.

6. Legal

The sales comp plan documentation is a legal agreement between the company and its employees. Therefore, it should undergo a legal review before sharing it with the sales force.

Final Touches 

Now you have all the right people at the party—giving you a more holistic, clear picture of what the company is trying to achieve. From there, you can design compensation measures that align and map more consistently to the larger corporate goals. 

For individuals in sales comp administration, there's nothing worse than starting a quarter just to be roadblocked by peers who didn’t have a clear image of the compensation plan from the very beginning. Instead, be sure to invite them to the party early on to make sure they have a say in the planning. It can not only prevent you from future headaches but also speak volumes to the effectiveness of your plans if everyone’s original ideas and suggestions can be accounted for from day one. Then, and only then, can your organization’s plans be aligned with larger corporate objectives.