You’ve heard the old saying that you can have too much of a good thing. Well that is exactly what came to mind when a CEO said that he has the exact same sales organization for more than 5 years. That’s right – no one has left this organization in 5 years! I asked him if his company was on target to reach his strategic goals for this year and got the “well sort of”, kind of answer.
Fortunetellers and crystal balls are great for Halloween fun but not for running your business. Much of what the sales compensation analyst deals with every month feels like guessing or at best looking into a crystal ball to see what will happen.
Each month the finance team is responsible for projecting the incentive expenses and associated revenue. So how do compensation analysts accomplish this?
We help many small to medium size businesses automate their sales compensation process, so we get to see a lot of different commission plans and get to offer a lot of best practice advice. One of the many areas we discuss with our customers is deciding on the total incentive amount and setting the commission rates. During this discussion we find time over time ONE thing that the customer often overlooks…but before we get to that let’s talk about this process a bit.
When out on my run at lunch today I started thinking how easy it is to get in a grove and plod along at a particular pace, never going any faster, just marking the miles until the run is over. Don’t get me wrong; this type of run has its place and some days I get a great deal of satisfaction from a run like this.
Money is money right?? Well, yes and no. Your company has a strategy to hit a goal…whatever that goal may be, for most companies the goal is to make more money. So you are ready to design the sales compensation plans and hopefully you have read some of our other blogs and know that those commission plans need to align with the corporate strategy. So a reasonable thought would be, let’s measure sales revenue and pay on that, a results based measure that focuses on making money, perfect. However, did you ask if HOW the company makes this money matters to the strategy??
We attended the World at Work’s Spotlight on Sales Compensation last week in Chicago. During one of the sessions the speaker asked the audience filled with sales compensation professionals that work at companies just like yours, who has dealt with a legal action due to their sales compensation plans. Forty percent of the room raised their hands…FORTY PERCENT! Did you also know that some courts will award triple damages to a disgruntled employee?? These numbers are not good for you and certainly not good for business.
What makes sales compensation risky?
I just got back from a sales conference where I participated in a round table discussion about improving your sales strategy. There was a lot of great conversation about what changes companies were making in the upcoming fiscal year to improve their sales strategy to match their corporate strategy. Some were creating product specialists thus having to do more team selling, some were creating account managers where they didn’t have them before. When I questioned the table if they changed their sales compensation strategy to match, the answer was a resounding no. They all felt like that w
This is Roxie and she is having her six month checkup, which reminds me that it is July and for those of you on a calendar fiscal year it is time for your sales incentive half year plan evaluation. You see Roxie isn’t very happy to have this checkup. Are you ready for yours? If not, get ready, arm yourself with data and not wishes and let’s figure out how healthy your sales commission plans are and if you will reach your strategic goals by year end.
You will need to start by gathering a few pieces of data that will help you assess the health of your sales incentive plans.