Today’s post is by Chad Albrecht, a ZS Associates principal and leader in the firm’s sales compensation practice.
If you’re like many sales leaders, you don’t pay full attention to your sales comp plan.
In fact, the ZS 2016 Incentive Practices Research study, which surveyed 28 medtech companies, found the following:
- 32 to 46 percent of all medtech companies fail to give parts of their sales comp plans regular, comprehensive checkups.
- even companies that regularly scrutinize sales comp plan design often ignore the secondary elements of their incentive plans (including quota-setting, salary levels, and new-hire program design) until after problems crop up.
The study also found the following.
- More than one-third of companies surveyed said they were unsatisfied with their long-term incentive compensation plans.
- When it comes to President’s Club programs, almost 90 percent said they’re somewhat or highly satisfied, but a third cited the issue of fairness as a problem area.
- Finally, nearly half (46 percent) of those surveyed revealed that they do not use third-party data to set quotas.
Does Your Comp Plan Actually Motivate Salespeople?
The point of a sales compensation plan is to motivate salespeople to put in their best effort. But when salespeople don’t trust the plan, or when they know that management is not routinely paying attention to the plan, it can actually demotivate reps.
As an example, I think about a story I heard from one of my clients about a top performer at an annual sales meeting. According to my client, the sales performer accepted his honor onstage -- and promptly gave notice. Logically, he knew he would never be able to beat his performance the following year based on the way his company set quotas. Rather than stick around and suffer through a year that would only result in failure and a lower paycheck, he decided to take his talents elsewhere.
How to Spot the Hidden Dangers in Your Sales Comp Plan
How can sales leaders take steps to improve in the area of sales compensation? In our latest white paper, we weigh in on three potential problem areas within your plan, and what you can do to ensure that these hidden dangers won’t compromise the success of your overall program. We advise the following steps.
- Regularly review your entire sales-compensation plan. Early and frequent reviews of your entire plan (not just your core plan) will alert you to any red flags and give you plenty of time to address potential problems before they do irreversible damage.
- Conduct comprehensive health checks of your plan. Look at your sales-compensation plan holistically. Be sure to fold in feedback from the entire organization (not just sales and marketing). This will help you identify potential weak areas.
- Pay attention to your quota-setting practices. Quota-setting is just one of dozens of moving parts within a sales-compensation plan, but it’s one area that can lead to major problems. Using third-party data to set your quotas is an ideal way to maintain fair, reasonable, and effective quotas year after year.