The holidays are over, and the optimism of the New Year is upon us. It is time to finalize the sales compensation plans for the new year.  For some, it may be approving final plan design for a major redesign effort.  Others may be making fine tuning adjustments to an existing plan.

Regardless of the degree of change or consistency in the design, it is important to remember five key factors to ensure your sales compensation plan’s success in the coming year.

  1. Keep the plan design focused. By focused we mean “aligned to reward the key sales priorities for the year.” Limit the number of performance measures to three.  Hold off on SPIFFs and contests until needed to avoid distractions.
  2. Don’t discount plan communication. Prepare the ‘elevator speech’ and ensure everyone (sales management, HR, finance, etc.) is on the same page to reinforce the message. This should articulate the primary essence of the plan (i.e., how compensation and rewards link to achievement of sales objectives). It is important to generate excitement when the plan is officially rolled out.  If possible, deliver the new plan details towards the end of the national or regional sales meeting typically held at the start of the plan year.
  3. Reinforce and celebrate success during the year. Publicly recognize sales reps who meet and exceed expectations playing by the compensation plan rules (vs. gaming the system).  Recognition is often over looked, but we find it to be a very powerful and cost-effective motivator. It is difficult to recognize success if performance results are not provided regularly so reps can change behaviors if necessary or continue what they are doing.
  4. Use contests and SPIFFs to address performance slumps or increase focus and excitement when needed. Unforeseen things happen during the year which may require additional incentives to correct. Well-designed SPIFFs and contests can jumpstart performance when needed, or provide that extra short-term boost to achieve a sales result.
  5. Track and monitor plan results during the year. It is important to evaluate the sales results you are getting in relation to the compensation costs.  This helps ensure the plan is in synch. Simple correlation analyses and compensation cost of sales calculations at mid-year can identify trends that indicate if you are on track or not.

For those launching new or updated sales compensation plans we wish you much success.  We hope these guidelines provide some useful insights to ensure your sales results are achieved in the coming year.