Rob from the poor and give to the rich, says consultant Joseph DiMisa. That’s how to use limited compensation dollars to give real rewards to top performers.
bigger rewards to your top performers, says DiMisa. Rewarding performance is the first of his incentive design challenges for 2013.
DiMisa, who is senior vice president, Sales Force Effectiveness, at Sibson Consulting, outlined eight design challenges during a recent webinar sponsored by BLR and HR Hero®.
Current Incentive Design Challenges for 2013
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Rewarding Performance |
Differentiating peak performers from average performers. DiMisa advocated the Reverse Robin Hood principle—take from poor performers and give to richer performers—that‘s what creates differentiation in sales pay. |
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Creating Clarity |
Simplifying the plans to improve line of sight. This is the holy grail of comp design, says DiMisa. Reps know what they are making from each sale. |
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Contests/SPIFFs |
Striking the balance between the pay program and supplemental incentives often put into effect by marketing. It’s like whale-watching—the comp plan is heading in one direction, then changes. Everyone runs to the left side, and then everyone runs to the right. And it’s like drugs—the more you give, the more they want. These programs are difficult to take away. |
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Managing Costs |
Controlling cost of sales under various performance scenarios. |
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Alignment |
Ensuring that the compensation plan meets business objectives. |
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Quotas |
Implementing a market-based approach to setting and allocating quotas. Represent market potential vs. what the company wants. |
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Measuring Profit |
Why is the sales organization making money when the company isn’t? Controlling deals and costs. |
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Systems and Admin |
Tracking and managing a plan that will work. |
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Sales Compensation Philosophy: Your Compass
A sales compensation philosophy is the compass that guides the sales compensation design process and ongoing plan administration. DiMisa suggests that the following elements are typical:
Typical Elements of a Sales Compensation Philosophy
- Role of Sales Pay
- Cost of Sale vs. Cost of Labor
- Performance Metrics
- Competitive Positioning
- Internal/ External Equity
- Level of Pay Dispersion
- Admin Guidelines and Communication
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The Top 10 Principles to Make Your Plan Effective
As you work on your plan (considering your philosophy), keep these 10 principles in mind, says DiMisa.
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1. Link to Company Goals |
Drive company objectives into the plan components controlled by each marketing, sales, and service job. |
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2. Accountability |
Hold participants accountable for results they control. Be sure you can measure what you are basing accountability on. |
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3. Alignment |
Ensure alignment of plans and philosophy and also around team results. |
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4. Cross-Selling |
Create positive interaction between channels. Clarify double crediting guidelines. |
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5. Pay for Results |
Pay for business results. Manage activities in that direction. |
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6. Significance |
Participants must perceive target incentive pay as obtainable, and it must represent a substantial portion of total target pay. |
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7. Simplicity |
Use as few measures as possible with the simplest mechanics to |
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8. Differentiation |
Significantly differentiate pay levels for excellence. |
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9. Involvement |
Develop with input from participants to incorporate ideas and create buy-in. |
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10. Management and Adjustment |
Manage to a metrics dashboard and don’t be afraid to course-correct if necessary. |
In tomorrow’s Advisor, how to show the return on investment (ROI) of comp program changes, plus an introduction to the all-comp-in-one website, Compensation.BLR.com.
It’s striking that the Reverse Robin Hood idea seems so novel–it shows how many employers just get in compensation routine, to the point that they may not even realize that their pay practices don’t reflect individual employee merit.
This is a truly horrible name and doesn’t really depict the intent of the technique. We utilize an across-the-board percentage increase (say 2.5% overal wage increas), but dole it out based on their metrics ratings and commitment to our operation. Some may only receive 2% and some may receive 3%, but overall the % increase will be 2.5%. We don’t view this as “robbing from the poor to give to the rich”; we view this as rewarding for performance while still maintaining an annual bump to help offset inflation.
Referring to this technique as “Reverse Robin Hood” will not garner any support from the people it affects. Choose a different name – fast!