1) Compensation levels and pay mix – Common reasons for a sales plan re-design are to attract more experienced sales talent and to drive business objectives. Before starting, or in conjunction with, a plan re-design, make sure that your compensation levels and mix of base salary to sales incentive are at “market”. Determination of “market” pay rates needs to take into account industry, type of sale, and stage of business.
2) Business Objectives – Review both financial (e.g., increase revenues) and strategic (e.g., grow a certain part of the portfolio, attract talent) goals. Discuss repeatedly with sales management. Prioritize business objectives and identify which should be compensable versus “just part of the job”. Identify which goals are quantifiable and ensure that the company is able to track these goals. For qualitative goals (and even some quantitative goals), make sure you have management put a “weight” on how important these are to the overall strategy of the company so that you can build them into the plan.
3) Market plan designs – It helps to review prevailing plan design practices in the market. What is common? What is unusual? Keep this in mind as you work through your particular plan design. You don’t always need to “follow the standard” but it helps to know when you are designing a “unique” plan. Be sure you decide what behaviors and outcomes your company will manage through management infrastructure versus through the payment plan. Too often, companies try to manage behaviors through the plan, resulting in complicated plans with diluted focus.
4) Appetite for Change – Consider whether the sales staff is ready for, or in need of, a major cultural shift or for small changes. If the company has a history of changing plans every year then maybe a “tweak” is better with an overhaul planned for the future.
5) Communication – The sales staff must understand how it is being compensated. In many cases, this means simplifying aspects of the plan or recognizing that just because it is quantifiable, doesn’t mean that it should be compensable.
6) Timing – When do you want to roll-out the plan? Make sure to allow ample time for redesigning the plan, examining how plan changes will affect the take home compensation of your sales staff as well as communication. This is especially important if you are changing compensation levels, pay mix or timing of awards.
7) Budget Setting – In determining how the plan will payout, you need to take into account how well the company sets quotas or sales targets. Often, this requires taking company culture into account.
8) Financial Impact – You need to consider the financial impact of any plan design changes on both the company and individual salespeople. Use historical data (if available) to model how the prior year’s achievement of goals would payout under the “old plan” compared to how the “proposed new plan” would payout.