In this, the third of three articles about determining the proper mix between salary and incentive cash when calculating sales compensation, O’Connell and Blessington discuss the benefits of field testing, and what makes this particular type of research so valuable.
Field tests can provide additional insights to determine if the current pay mix (i.e., split between salary and incentive cash compensation) assumptions are accurate or not. For example, does an 80/20 pay mix (80% base salary, 20% incentive compensation) motivate most of your salespeople? It would not be unusual to find certain pay mix levels are motivational for some reps but not all. Such a finding might lead you to explore a mix of compensation plan designs that better fit the territory, amount of recurring versus new business, etc. In other words, the days of “one size fits all” may need to become a design assumption of the past when calculating sales compensation.
Sales Compensation Field Testing Requirements
Field tests have three main requirements in order to be successful. Initialing a field test without satisfying these requirements is to engage in professional malpractice. Here’s what is required:
1. Identify the treatment and control groups. The portion of the sales team to use to test plan design changes is the treatment group. The remaining sales force continues under the existing plan as the control group. This way, results between the two groups can be compared to determine whether plan design changes are appropriate or not.
2. Have a feedback mechanism to see how salespeople respond to plan design changes. Feedback metrics can capture either outcomes (e.g., increased sales, number of new deals closed), behaviors (e.g., new account management or closing tactics used, additional time spent selling), or perceptions (i.e., how reps feel about the new plan). It is always better to measure behaviors that are more closely linked to revenue and profitability.
3. Keep the treatment and control groups separated. It is important that neither group has outside interference with bias the results.
Sales Compensation Field Testing Guidelines
Here are some basic guidelines for conducting field tests.
1. Start a test with change options that are simple and easy to execute. Better to start with low hanging fruit than more complex changes. As you gain more experience with field-testing, it will be easier to construct tests for more complex design changes.
2. Focus on short term results. Best to identify changes that can be captured quickly — monthly or quarterly are ideal. The sales cycle will help guide you. If results take 6 months or longer to capture, field test for plan changes need to be planned well in advance.
3. Concentrate on individual reps. You are looking for a correlation between the stimulus (e.g., incentive plan change) and the response (e.g., increase sales, deals closed, etc.). Individuals may react differently but trends will appear.
4. Test the primary premise to see if “proof of concept” is valid. The goal is to prove the plan change works or not. If results are positive the plan change can be refined and implemented. Otherwise, the plan change requires additional work and testing.
5. Analyze test results. It is worth seeing the impact by different data slices — territories, customer account segments, reps at different performance levels, etc. Additional insights may help refine the plan change or send you back to square 1 with more information.
Benefits of Field Testing Sales Compensation Plans
The primary benefit of conducting field tests before calculating sales compensation plans is that it validates a new plan design and avoids broad implementation of a faulty plan design. If you are trying to change or redirect behavior, field tests can provide the fact base for finding which plan design features are most effective in driving the results you want.
Field tests can change sales compensation design decisions based on conventional wisdom to plan designs validated by fact-based experiments.
Field tests can validate new plan designs prior to full-scale implementation. They also can save companies from wasting time and money by avoiding ineffective or improperly calculated sales compensation plan designs and implementation efforts.
Traditional modeling of new sales compensation programs is an essential part of the design process, but unfortunately only provides a rear-view mirror approach. It assumes if the new design were in place, reps would change behavior. Field tests provide a “through the front windshield” view. You can actually see if plan changes will modify behavior and improve results or not. It eliminates the guesswork and assumptions that marketing and sales executives have relied on for decades.
In a business era where agility is akin to survival, field-tested sales compensation plans may make the difference between staying ahead of the completion and falling hopelessly behind.
Kevin O’Connell is Managing Partner at Accelerate Consulting Group, a sales effectiveness consulting firm.
Mark Blessington is President of Mark Blessington Inc., a sales and marketing consulting firm. Mark’s most recent books are: Full-Scale Forecast Aggregation; Sales Forecasting: A Practical Guide; and Sales Quotas: An Analytical Approach to Quota Setting.
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