By Kevin O’Connell Managing Partner, Accelerate Consulting Group
Caution: New metrics for sales incentives require history.
I learned this lesson the hard way a long time ago.
Our client at that time was built by acquisitions, lots of them. All of the acquisitions had different sales compensation plans, which needed to be redesigned and harmonized. After the sales force was reorganized and sales roles clarified, we worked hard to identify the best performance measures for the new sales incentives plan. The new metrics were profit oriented, which aligned with the strategy.
The new measures checked off all the boxes except one:
|✔︎||Aligned with business strategy and sales imperatives|
|✔︎||Controllable by the sales team|
|✔︎||Able to measure, collect, and report results at the rep level|
|History to model and test new metric and plan design|
The acquired businesses had different systems, practices and management capabilities, which created gaping holes in the historical performance data. Without the history, we were not able to model the new plan and conduct a winners and losers analysis to validate the new plan design.
Fortunately, we had a Plan B:
- Payout on revenue to start.
- Communicate that this is a transition year with the goal to move to the new profit metric.
- Collect and report the new profit metric results to the sales team.
- Calculate incentive payouts on new metric and share with sales management to reinforce right behaviors and help reps make the transition.
- Use 12 months of collected history to make final plan design adjustments.
- Implement and communicate the new plan at the start of the new year.
History provides a window to see how stable or unstable the performance measure is. Using less than 12 months is likely to provide an incomplete picture. History also provides valuable insights about how viable the new metric is for paying sales incentives.
The key takeaway: If you’re updating or designing a new sales incentive plan and have a new performance measure, make sure the history is available. 12 months of history is best, and using less than 6 months is not recommended.
When it comes to people’s pay, do not throw caution to the winds.
Accelerate Consulting Group’s mission is to help clients improve sales performance by:
-Creating strong, coherent alignment between strategy, the drivers of organizational and sales effectiveness, and an organization’s people.
-Focusing on execution – the tactics and capabilities that will support change and create success.
-Developing practical solutions that can be implemented to drive results.