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 Syndication |
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Making Sure Your Compensation Plan Drives the Desired Objectives
Making Sure
Your Compensation Plan Drives the Desired Objectives
One of the most important considerations when designing and
deploying compensation plans is not to get caught in a ‘‘legacy trap.’’ More
than one sales manager has found that she inherited a plan that was based on a
past business environment requiring a very different set of competencies and
behaviors. Don’t let this happen to you. Review and ask yourself the following
questions:
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When was the current compensation plan
designed? If it is more than three years old, it’s out of date with regard
to industry changes.
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What was the complexity of the products or
services sold at the time the plan was designed? Has your product become
more complex with options, add-ons, or multiple applications?
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What was the required level of customer
relationships at the time the plan was designed? Maybe in the beginning your
personnel sold to buyers, but now your product must be sold to departmental
managers or corporate leaders. Or, maybe it’s the reverse as your product became
highly substitutable from ‘‘look-alike’’ competitors.
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What was the competitive environment at
the time the plan was designed? Were there many competitors the last time
you changed your compensation plan? Maybe you had the marketplace to yourself at
that time, but now you find more and more look-alikes that make it hard to
differentiate and cannibalize your profits.
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What was the pace of business at the time
the plan was designed? How urgent was the sales activity when the plan was
developed? Had anyone ever heard of just-in-time deliveries? How many accounts
were sales professionals required to service or sell to? What was the standard
delivery schedule, and how has technology changed customer expectations? How
long did a new salesperson have to develop into a ‘‘producer’’ at that time? Has
that changed?
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What was the utilization of technology at
the time the plan was designed? When your compensation plan was last
modified, was there the overlay of technology on just about every activity the
salesperson performed (pager, e-mail, voice mail, PDAs, cell phones,
teleconferencing, etc.)? Remember how secretaries were made extinct by
computers, voice mail, and e-mail? In the past, how much of the salesperson’s
time was spent selling and how much managing the flow of information?
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Now, what’s changed? You can bet that
things have changed! Just review the business drivers we talked about in Chapter 2 and
consider how much and how fast these areas have changed.
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Does the current compensation plan reflect
these changes? Just because ‘‘things’’ change, it doesn’t mean your plan is
wrong. Perhaps it was so well designed in the past that a natural flexibility
was built into it. Maybe you need to make only minor changes. On the other hand,
maybe you need to toss out the whole program and begin again from scratch!
As the link between senior management and the sales team’s
activities in the target market, it is your responsibility to ensure that the
total compensation plan is always in line with a continuously changing business
environment. There are three areas to consider. They are:
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Direct Compensation. Salary or fixed
pay, performance or at-risk commission, deferred bonuses.
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Benefits. Social Security, health or
other insurance, profit sharing, stock options, tuition reimbursement, etc.
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Reimbursed Expenses. Travel expenses
or car allowance, entertainment, communications, office or technology expenses,
etc.
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