While most sales organizations are pushing hard to deliver the sales results for 2017, it is not too early to start planning and preparing your sales compensation plans for 2018.
World class sales compensation programs are a result of well organized and executed plans that closely align to the annual business goals and sales strategies of the company. Those organizations that struggle every year to get the desired results from their sales compensation program, typically leave the process too late and don’t dedicate enough time and resources to do the proper job.
Properly designed and implemented, the sales compensation plan can be the most important “tool” for sales management to influence sales behaviour and results. Some of the key elements for planning for the coming year are:
- Research – Analysis of events since the implementation of the current plan(s). Examples of this include: performance versus personal quota, sales by product/service, overall performance distribution of salespeople versus targets, incentive earnings YTD, the turnover by role and tenure. These and other performance indicators are critical information n planning for the coming year. It is often good to review the past year or two as well to ensure that you are sensitive to trends that develop over time.
- Business Plans – The planning process may be in process for the next year, but it is essential that the compensation plans be developed in concert with the business plan for the next year rather than as an afterthought. The budgets, market targets, new product introductions etc. are all information that must be incorporated into the proposed plans for 2018.
- Changes in Strategy & Structure – Changes in sales strategy must be evaluated against the existing sales compensation programs to ensure that the compensation model with support and reinforce the required sales paradigm for the next year and into the future. If not, the compensation program may be rewarding an outdated sales paradigm that will reduce the effectiveness and efficiency of your sales efforts.
- Market Compensation – Good plans, that are not competitive with the market compensation levels for the company sales roles will not have the desired motivational impact that companies are looking for in today’s competitive sales environment. Having good benchmark market data for comparison to current compensation levels with your sales organization ensures that solid sales performers are earning commensurate with their performance and industry peers.
- Plan Design Changes – Changes to the compensation plans are sometimes an annual exercise for many organizations. Conversely, some organizations only make changes every few years to remain current. When changes are necessary, it is critical that the change process reflects best practices in both design and transition to the new program. In many cases, the design process is often as important as the change being made. Gaps in following the established design process usually result in less than optimum plan performance.
These among other activities in the sales compensation planning process are not minor tasks that involved in addressing the sales compensation needs for the coming year. To optimize plan performance for 2018, it is essential that you begin the planning process as quickly as possible and dedicate the resources required to meet the needs of the field. The right plan for 2018 can make the difference between delivering on stakeholder expectations or failure to launch.