What does it take to have an effective sales compensation plan? Is it enough to have the plan aligned with strategy and to communicate it to the sales force? These are, of course, crucial factors for effectiveness, but you need to take it one step further and make sure that executives and managers have the facts they need to make informed decisions, adjust plans according to results, reward top performers, and coach people when necessary.
“90% of managers see the ability to provide management with timely accurate performance metrics as very important or mission critical, while 47% say this needs improvement in their organization”
– CSO Insights 2014, Sales Compensation & Performance Management Study
In my experience, the following steps will help you improve visibility into compensation plan effectiveness and will give management the tools to proactively increase sales force performance:
- Pay special attention to performance metrics
- Define metrics according to expected performance
- Make sure they are in line with the strategy
- Don’t over measure; stick with the most important indicators
- Monitor results and adjust when you identify deviations
- Analyze compensation plan effectiveness
- Define metrics for effectiveness: how will you know your plan is working?
- Measure and report on the metrics periodically
- Identify areas of improvement; decide on next steps
- Provide performance information to managers
- Make information readily available anytime managers need it
- Data should include complete information about performance of sales reps and about overall goal achievement
- Reports should be identically structured for all managers
- Eliminate the need for special requests and custom reports
- Develop a single system of record for all management information
- Provide easy, self-service access to an online portal where managers find all the information and reports they need about their sales reps
- Keep the portal up to date with timely information and educate managers on how to use it
- Custom reports should be the exception; analyze whether a certain custom report would be useful for all managers and, if so, include it in the standard reporting procedures
Some of these steps you can take immediately, while some might take a while to implement, but don’t ignore the importance of visibility into sales compensation plan effectiveness. Visibility enables managers to be engaged with #sales which translates into improved performance. According to the CSO Insights study cited previously, organizations with a higher percentage of the sales force engaged in selling efforts had significantly more reps meeting or beating quotas and lower turnover, both voluntary and involuntary.