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Six 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.

5 min read

You may feel we're being a bit too generous here with the word "party," but considering how much we love flawless incentive compensation, we think a celebratory vibe is just what your planning committee really needs. That, and a few other things: probably snacks, definitely the right guest list.

In fact, incentive comp planning process breakdown happens largely because companies fail to create the right guest list—resulting 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 (i.e. revenue increase that comes specifically from a new strategic product line).

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 there to ensure better alignment in your compensation:

Sales

A senior representative from sales (VP or Director) is the person best connected to both company goals and staff capabilities. He or she will keep other exec's expectations reasonable—while pushing for aggressive results.

Human Resources

The HR department often owns the overall compensation strategy and philosophy for the company. They will bring benchmarking and market pay data to the conversation, as well as current employment, regulatory, and fairness issues.

Finance

CFOs and other finance leaders have a huge stake in ensuring that the appropriate measures for sales compensation are set, as 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.

Marketing (senior representative)

This individual has the long-term perspective of 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.

Compensation Analysts

Compensation analysts 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.

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.

Moving Forward With Your Dream Planning Team

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. You may also want to invite outside experts (consulting or strategic services) to this little shindig. Have them "gut check" your proposed plan and provide you with an unbiased opinion, best practices, industry knowledge, and big data insights.

For people in sales comp administration, there is nothing worse than getting into the quarter and being roadblocked by peers who didn’t have a clear picture of the compensation plan from the start. Instead, make sure to invite them to the party early and get everyone eating from the same snack bowl. Not only will it save you from future headaches, but it will also go miles in terms of creating a plan that meets the larger objectives of the company.