Maximize Sales Performance with Compensation Planning
By: Russell Gummelt and Casey Bulik
Effective incentive compensation is an asset for employee motivation and has a direct correlation to obtaining and retaining a driven sales team. Incentive compensation plans require a delicate balance with a variety of moving parts and adjustments made by decision makers. To create transparency and achieve sales goals, incentive compensation clarity is key. Designing an effective incentive compensation process requires a strategic approach that aligns with your sales objectives, motivates your sales teams, and ensures fairness and transparency.
Let’s dive into the key components for an effective incentive compensation process:
1. Define Measurable Metrics: Identify Key Performance Indicators (KPIs) that contribute to your sales objectives and drive your sales strategy forward. These metrics typically include sales revenue, net new customer acquisition, upsells, cross-sells, renewals, contribution margin or customer satisfaction scores. Measurable metrics in your incentive compensation process remove ambiguity and increase payee trust in the process.
2. Regularly Review and Adjust: Market dynamics, business priorities, and sales strategies evolve over time. Therefore, it's essential to review and refine your incentive compensation plan periodically. Solicit feedback from sales teams, analyze performance data and adapt the plan accordingly to ensure its relevance and effectiveness.
3. Monitor and Measure Performance: Establish robust tracking mechanisms to monitor sales performance against targets in real-time. Analyze performance trends, identify top performers and recognize achievements promptly. Regular performance reviews provide insights into the effectiveness of your incentive compensation plan and enable timely adjustments if needed.
4. Ensure Transparency and Clarity: Ambiguity breeds distrust and can demotivate sales teams. Make sure that your incentive compensation plan is transparent and clearly communicated to all stakeholders. Outline the eligibility criteria, performance metrics, payout structure and any thresholds or accelerators in a comprehensive document.
5. Incentivize Collaboration and Teamwork: While individual performance is important, fostering a collaborative sales culture can drive collective success. Consider incorporating team-based incentives or rewards for achieving departmental goals to encourage teamwork and synergy, especially among sales teams focused on complimentary products, geographies and customer bases.
6. Establish Governance: Establish a governance committee to meet quarterly at a minimum to review the compensation process for the current year, how total pay is trending within the organization and resolve any large discrepancies happening in near real time.
7. Stay Compliant and Ethical: Ensure that your incentive compensation plan complies with legal regulations and industry standards. Avoid incentivizing unethical behavior or practices that could compromise the integrity of your sales organization. Transparency, fairness and integrity are essential pillars of an effective compensation plan.
These 7 Key Components require the collection and assessment of a variety of data and the understanding of how-to best plan for revenue goals down to the salesperson. an extensive and accurate sales incentive plan can take large amounts of time and energy, only to be a constantly turning wheel. This kind of complex planning and assessment cannot be done in spreadsheets. Technology is needed to calculate, execute, model and measure incentive compensation in real-time.
A mature compensation platform like Anaplan can CALCULATE complex crediting rules, EXECUTE existing plans, MODEL plan expectations, and MEASURE effectiveness for plans to meet company goals. Anaplan excels at key components of the incentive compensation process:
· CALCULATE complex crediting rules for organizations that pay a lot of people from individual transactions. Rules can be created in Anaplan to credit multiple payees for a transaction based on factors such as geography, account ownership, product alignment and other overlay situations.
· EXECUTE Plans by calculating existing compensation plans and allowing Sales Users to model their potential commissions based on Pipeline and other data already available from your CRM system.
· MODEL future plans by looking holistically at the incentive compensation payouts against company bookings and make top level adjustments to implement in future plans.
· MEASURE how Plans have tracked against company revenue and determine a cost of sales attributable to each pursuit. As a sales leader, do you know how many payees are performing well and what the cost of sales is to the transaction level? Allitix and Anaplan can provide such insight.
To have a successful sales team, and reach companywide revenue goals, incentive compensation plans must meet these 7 Key Components. Having a tool that can calculate, execute, model and measure can save time, increase planning accuracy, and ensure your incentive compensation plan is successful. Allitix is here to help, reach out to our sales planning experts to get started on your incentive compensation planning journey.