Sales comp is tricky any time, but it is especially difficult now, when so many things are changing: the economy, the customers, the products, the technology. But you still need a plan. Expert Laura Roach has one.
In yesterday’s Advisor, we began expert Laura Roach’s 10 practical steps for aligning sales comp and corporate strategy. Today, the rest of her steps, plus an introduction to a popular guide just for smaller—or even one-person—HR departments.
Laura Roach CCP, is General Manager at Varicent Software Incorporated, a provider of incentive compensation and sales performance management (SPM) solutions, offered her suggestions in a recent Varicent white paper.
Here are the rest of the 10 steps (Go here for steps 1 to 7):
8. Determine Performance Measures and Payout Periods
This step addresses timing considerations, Roach explains. How frequently can the right data elements for measuring and reporting be captured? For example, a sales position that is highly leveraged on a 100% commissions plan will need to be measured and paid frequently, whereas a less leveraged position may be measured frequently but paid out quarterly. Are measurements tracked cumulatively or discretely? What controls or audits need to be in place for recovery, claw backs, errors, etc.?
Model and Rollout
The company now boasts a fabulous plan, but it needs to be tested – what are the associated costs; what is the earnings impact? Steps 9 and 10 allow companies to model and analyze the new plan’s impact before the final roll out takes place.
9. Complete Cost Analysis and Determine Earnings Impact
This is the point at which companies should model the impact of their new recommended plan changes and conduct an associated cost-benefit analysis. Ideally, this should be done with historical data, growth assumptions and other relevant financial planning assumptions taken into consideration. For instance, is the plan driving the expected behavior? Is it rewarding top performers appropriately? Can the plan cost be justified?
10. Finalize and Launch Plan
Too often, companies exert too much time and effort around the design and administration of the plan without any subsequent strategic communication effort. It is critical that the sales team understands the plan and the reasons why it is being rolled out. The best roll out processes are usually initiated at step one with the investment and participation of a cross departmental team. Companies that include in the plan development and roll out the participation of a representative sales focus group comprised of influential sales leaders, are more successful in plan adoption from beginning to end.
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