Steve MarleyPrincipal,ZS Associates
Chad AlbrechtPrincipal,ZS Associates
Mike MartinPrincipal,ZS Associates
Justin LaneManager,ZS Associates
For most decisions in life, it’s usually easier to say “yes” than “no.” But often you have to say “no” to something in the interest of saying “yes” to something else. For example, to spend more time with your family, you might have to say “no” to more volunteer work.
About a year ago, I wrote a blog post – “Why Rank Plans Can Bring Out the Best – and Worst – in Your Sales Force” – about the risks of internal competition that can result from a rank plan. I still believe that risk exists, especially with smaller sales forces where helping a handful of people could have a significant impact on your rank spot. However, from my recent conversations with sales leaders, I have heard some compelling arguments for “selective competition.”
Well, we are one month into the 2014 calendar year, and undoubtedly some of us are already considering changes to our sales compensation plans.
I have worked with some companies that have taken a “set-it-and-forget-it” approach to their sales compensation plans. However, that approach requires a certain culture and focus when the going gets tough. In my experience, most companies evaluate plans and tweak them for atypical or extreme situations with some regularity.
Inside Sales is truly becoming a formidable force. In the last 10 years, the number of inside salespeople has grown at a double digit compound annual growth rate (CAGR). While most companies agree about how inside sales can be a cost effective, highly efficient way to increase sales, they do not universally agree on how to incent them.
This year, my wife and I made a New Year’s resolution to eliminate the clutter in our house. I do not consider us to be messy people. I think we just have too many little things and no place to put them.
I find a similar feeling occurs with some companies as they kickoff their 2014 incentive plan.
When meeting new fellow sales compensation practitioners and clients, one of the first things I do is ensure we are all speaking the same language. That is, that we’re using the same words to describe the same things. One of the most common set of words to clarify is “quotas,” “goals” and “objectives.” In some companies, an objective is the salesperson’s individual quota, while in other companies an objective is used to describe something more akin to an MBO. Fortunately, these three terms can be reasonably easily interchanged with minimal confusion.
I have been having many conversations recently with sales ops teams getting ready for 2014 about "mathematical fairness" and "perceived fairness."
I consider the standard checks teams perform on their sales compensation plans to be measures of mathematical fairness, which checks for quantitative inequalities. It ensures, for example, that both large-volume and small-volume territories have the same opportunity to earn, or that different geographies, such as Manhattan and Texas, have the same opportunity to earn. These checks are often shown through scatter plots or bar graphs. They are very useful and provide confidence to the home office and sales leadership that the proposed incentive plan is fair.
However, they do not always translate as well to the sales force.
Most sales compensation leaders are feeling good about where they are in the 2014 sales incentive plan design process. The management team is finalizing the design, developing the rollout plan and expressing confidence that the plan is aligned with the strategy.
But inevitably, if reps’ incentive pay is based at least in part on attaining their quota, when these plans roll out, the field will not be satisfied until they see their quota.
As technology improves, we get better data and our sales ops processes become more sophisticated. Our sales reps are armed with more information than ever about their territories, which allows us to better set rep-level objectives and track performance.
However, could such abundant data also make reps—especially those hired for their strong personal drive and ability to work independently—feel like they are working under a microscope?
As the plan design season starts to wrap up, it’s not too early to think about how to improve the administration of your new plans. Companies invest a significant amount of money to fund incentive plans, yet most companies are lacking in efficiency and effectiveness when it comes to administering these plans.
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