How to Overcome the Top 5 Sales Compensation Planning Challenges
In our ongoing blog series, X-Factor Leaders in Compensation, we’re asking sales compensation professionals about their journeys in incentive compensation planning, their challenges, and their successes. Throughout our surveying process, we’ve noticed that sales operations and compensation professionals face many of the same five challenges in their roles.
To help combat these common sales operations obstacles, we’re sharing some expert tips and best practices for sales compensation planning.
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CHALLENGE: We Can’t Make Decisions in a Timely Manner.
SOLUTION: Build Your Planning Team Strategically.
Start your compensation planning process by building a team with strategic key players in mind, ideally four to five people. When you have too few or too many people on your team, the decision-making process can get slowed down, and miscommunication between multiple parties can lead to additional delays and setbacks.
Aim for a planning team with one member from each of the following departments sales leadership, finance, human resources, and an outside expert from consulting or strategic services. Each member will bring their team’s needs to the planning table, which will help ensure that all company objectives are kept in focus. Once your plan is built, share it with top members of your marketing, compensation analysts and legal teams to ensure each department knows the ins and outs of the plan.
CHALLENGE: A Large Number of Incentive Elements Makes the Plan Complex.
SOLUTION: Use the ABCs of Compensation Planning to Keep Plans Simple.
Having several voices involved in your compensation planning process can create a plan that is highly complex and hard-to-understand. Ideally, your plan should consider all executive and departmental plan elements, but it should remain simple to execute and easy to understand and communicate.
Use the ABCs of sales compensation planning to combat plan complexity and ensure you are focused on driving the sales behaviors that will help achieve company objectives. Build your plan so that it is:
A: Aligned to Sales Roles: Ensure that your plan is customized for each sales role and their unique responsibilities.
B: Based on Company Culture and Philosophy: Consider the amount you want to pay reps based on market and industry competition as well as the difference in pay for high- and low-performers.
C: Constructed to Drive the Right Sales Behaviors: Look at each incentive element to determine the sales behavior(s) it encourages. Ultimately, you want your plan to put emphasis on incentives that drive sales behaviors that will work to achieve company objectives and goals.
CHALLENGE: It’s Hard to Ensure Everyone Understands the Plan.
SOLUTION: Take Measures to Communicate the Plan Effectively.
One of the most crucial steps in compensation planning success is communicating your plan effectively so that each member of the sales team understands it fully. Typically, this can be challenging for a few reasons, including:
- Sales reps may believe that changes to the compensation plan will result in a loss for them
- Employees are sometimes naturally wary of decisions that management considers “for the best” of the company
- Leaders and management may lack the ability to clearly communicate the plan changes
Luckily, you can avoid plan rejection and confusion by communicating clearly and effectively:
- Assemble a team that has communicated effectively in the past. Start your plan communication with top leaders and executives and work your way through each management level.
- Be transparent by explaining the differences between the new and old plans. Make it clear and put emphasis on how this benefits each sales role.
- Check in with managers and sales reps to ensure that everyone understands the benefits of the plan, the overarching sales objectives, and how the plan functions.
CHALLENGE: It’s Hard to Report and Consolidate our Sales Data.
SOLUTION: Use Specific Metrics to Ensure Plan and Sales Effectiveness.
When implementing and monitoring a new sales incentive plan, it can be difficult to gather data and consolidate metrics. Once you implement the new plan, you should continuously monitor sales performance and periodically analyze your plan’s effectiveness.
Like your plan design, aim for simplicity and focused metrics to monitor the effectiveness of your plan. As you begin to understand the initial workings and results of your plan, you can dive deeper into data, but at the start, focus on these need-to-know metrics:
- Percent of sales reps meeting (and exceeding) quota
- Lead response time
- Sales win rate
- Time spent training and coaching sales reps
- Sales rep satisfaction
CHALLENGE: It’s Hard to Integrate Sales During Mergers and Acquisitions.
SOLUTION: Use Sales Performance Management (SPM) Tools for a Smooth Implementation.
Mergers and acquisitions (M&As) raise a lot of questions and uncertainty. Sales teams worry that they might lose opportunities through territory adjustments and product line changes, while executives may worry about the impact of post-merger transition and confusion on overall company productivity and revenue growth.
It is nearly impossible to manage sales integration and compensation during M&As, which is why automated SPM software helps smooth transition and integration of sales teams, manage territory planning, and monitor and implement new compensation plans.
It’s also been shown that SPM solutions make it easier for companies to combine sales forces more quickly and hit the ground running without losing any momentum by:
- Shortening territory design and planning time by up to 75%
- Improving sales forecasting accuracy by 96%
- Ensuring timely and error-free commission payouts
Designing and implementing a strong, successful compensation plan is not always an easy task. There are several challenges that can slow down the plan design process, but with the right team, tools, and mindset, your plan can help strengthen your company and drive growth.
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