Today’s post is by Nick Kane, managing partner at Janek Performance Group. He has trained more than 15,000 sales professionals worldwide and is passionate about helping sales professionals improve their selling careers – as well as their lives. He is co-author of Critical Selling: How Top Performers Accelerate the Sales Process and Close More Deals.
After working with numerous companies over the years, we’ve seen it all – from high-performing comp plans to those built in ways that totally fail to support the sales process. Here are some of the sales compensation trends we’ve seen in recent years, and some best practices for building a high-performing compensation plan.
Trend #1: Comp Plans That Support Team-based Selling
In the past decade or so, many sales organizations have transitioned to a team-based sales approach. Consequently, many sales compensation plans are now moving from individual-performance based to team or even company-based plans tied to overall performance – while still accounting for an individual’s specific role within that more multifaceted environment.
Trend #2: Comp Plans That Embrace Greater Transparency
Transparency is another factor to consider when starting the sales compensation plan design process. Of course, transparency is not exactly a new best practice when it comes to comp plans. However, it’s worth noting that today’s sales force wants even greater transparency in the sales compensation plan – including knowing 1) how compensation is calculated and 2) why the company selected a particular compensation model.
With that in mind, clarity is the single most important starting point in designing a sales compensation plan. Make sure everyone in the organization is on the same page and clear on things like sales environment, everyone’s role in the organization, and team and company goals.
Trend #3: Comp Plans That Account for Leading Indicators
Part of those goals involves incentivizing desired behaviors. This isn’t just about lagging indicators like revenue and client growth. Sales leaders need to integrate leading indicators (such as new markets, technical acumen, and customer satisfaction metrics) into their sales comp plans.
Tips to Design an Excellent Sales Compensation Plan
The physical (or digital) plan document itself needs to be clear, simple, and transparent. Include a calculator that allows salespeople to test different benchmarks and resulting compensation levels so they understand what they need to achieve in establishing their own personal goals. The easier you make the plan to comprehend and calculate, the more effective your sales reps will be.
The communication surrounding the plan is as important as the plan itself. Especially if you’re designing a new system, people are going to have a lot of questions and suggestions. That means getting them involved from the start – for example, consulting with team members in person or via survey, or both, to get a feel for what your sales organization as a whole values most in terms of compensation. No team will have the exact same set of values and rankings, so it’s vital to get an aggregate picture of what’s most valued and desired overall.
After you’ve conducted this preliminary research and drafted the plan, disseminate it to select members of the organization and ask for specific feedback. While you’ve done most of the work and have things largely set in stone, the responses might lead you to make minor tweaks before finalizing the document. Making these small adjustments will also make your workers feel heard and create stronger buy-in to the new plan.
A final note: Once you have the compensation plan set, don’t get locked into it. While you shouldn’t make radical changes each year, be open to them, and communicate to your team that the plan might well be slightly adjusted as the company’s situation changes. The best approach to take in this regard is to zero base the plan each year and then evaluate to see what minor tweaks might be needed.
What a Great Sales Compensation Plan Looks Like
In short, your sales compensation plan should drive your desired behaviors and be as simplified and clear to understand as possible. Communicating with your sales organization regularly and getting selected team members’ input will foster employee connectedness and buy-in, helping them become more productive and effective through their sense of being invested and involved in the compensation creation process.