“Life is really simple, but we insist on making it complicated.”
– Confucius
The same can be said for sales compensation. Incentive compensation plans are often far too complex. This complexity is usually the result of trying to make the plan fair or trying to please every stakeholder. In turn, this complexity makes these plans difficult to understand. Salespeople are busy. They spend most of their day visiting customers, and that’s what we want them to be doing. We also want that time with customers to be focused on the things that leadership believes will improve their performance and the company’s performance.
With this in mind, an incentive plan should be as simple as possible. If a plan is too complex, two things may occur:
1. A sales rep will become frustrated and ignore the plan. Instead, he’ll focus on what he thinks will work best, not what leadership wants him to focus on. He’ll focus on his work and hope the incentives pan out.
2. A sales representative will spend too much time focused on the incentive plan. He’ll try to tease out every possible permutation and lose focus on his primary objective: selling.
Neither of these scenarios is in the company’s best interest.
Take a moment and reflect on what might be leading to an overly complicated incentive plan. Could you explain your plan to someone who knows nothing about sales compensation? To test this theory, sit down with someone who is unfamiliar with sales compensation and try to explain your plan. If it doesn’t go well, consider improving it by addressing the following questions:
1. How many metrics are you using to evaluate performance, and why?
- What would happen if you eliminated some of them?
- Would the sales reps supported by the plan be concerned?
2. How are you communicating the plan?
- Do you have short, concise documentation?
- Are you using FAQ documents?
- Do you have live sessions or calls where the field can ask questions?
- Are first-line managers fully briefed on the plan? Do they understand it, and can they explain it to their team?
3. Are the strategic objectives clear?
- Are they being shared with the field outside of the incentive compensation plan?
- Does the sales force understand how they are tied to the IC plan?
- Does the field force believe they are being compensated fairly?
- Was the complication introduced as an attempt to maintain equity?
- Is this necessary if the field already feels they are being treated fairly?
The bottom line? People don’t trust what they don’t understand. Answering some of the above questions will help you simplify your compensation plan, and with this simplification, your sales force’s confidence in the plan also should grow.
ZS has more than 30 years of experience artfully blending sales compensation plan design, the latest technology and day-to-day compensation management into an optimal solution — for both global and local organizations.
Copyright © 2018 ZS Associates, Inc. All rights reserved.
Originally published in ZS’s sales compensation blog, on The Carrot: July 2018 [https://info.zs.com/thecarrot/is-your-complex-incentives-plan-holding-you-back] Reprinted with permission.
Join Albrecht and Marley with Hinda executives for a webinar panel discussion looking at integrating sales compensation and non-cash incentives to maximize results October 18. Visit https://salesandmarketing.com/webinars to enroll.
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