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A Crucial Step in the Launch of a New Sales Incentive Plan

By: J. Mark Davis, Managing Principal, Valitus Group, Inc.

In my experience, the primary reason any new sales compensation plan fails has relatively little to do with the specific plan design elements. It typically has more to do with how well the new incentive plan is implemented into the organization. A crucial aspect of any sales incentive plan launch is the training provided to the frontline sales management team - training that is intended to prepare them to lead their sales teams under the directives of the new plan. Why is this so important? Because we're all creatures of habit and we typically don't like change. If your sales managers aren't fully supportive of the new sales incentive plan, they and their sales staff will have no trouble finding countless reasons why the new sales compensation plan is a bad idea.

In October 2006 I co-authored the WorldatWork survey entitled, "Key Sales Incentive Plan Practices." Among other things the survey sought to capture insights with respect to the level and nature of support provided to frontline sales managers in the rollout of a new sales incentive plan. The survey results, reflecting 440 respondents from the WorldatWork membership base and representing a varied industry demographic, presented some surprising and troubling insights.

Strike One.

The first survey question dealing with sales manager preparation asked, "How does your organization prepare frontline sales managers to manage with a changed sales compensation plan?" Respondents were given seven response options. In the fourth most cited response, only 22% of survey participants indicated that their sales managers participate in formal face-to-face training sessions designed to equip them with the information and skills needed to manage effectively with the new incentive plan. Worse yet, as the table below illustrates, 44% of survey participants indicated they do nothing specifically focused on preparing frontline sales managers for a new sales incentive plan or on enlisting them as change agents for the rollout process.

How the Organization Prepares Frontline Sales Managers	% of Respondent
Direct communication about new plan to all sales employees; no specific sales manager orientation or training	24.8%
Currently under consideration; plan to initiate a defined process in the near future	10.0%
Nothing special is done	9.1%
Total Providing No Specialized Sales Manager Training	43.9%

Strike Two.

The second survey question on the subject of sales manager preparation asked, "Which of the following topics are addressed during your organization's efforts to prepare frontline managers to effectively manage with a new/revised sales incentive plan?" For this question, respondents were given 16 defined response options. The top five responses shown below were not surprising and reflect those elements one would expect to find in a well-planned sales manager training effort.

Sales Manager Training Topics - Top Five Responses	% Indicating Topic is Addressed
1. Company business objectives and go-to-market strategy	87.4%
2. Rationale for changing the sales incentive plan	85.7%
3. How the sales incentive plan ties to the company's business objectives	82.9%
4. Comparison of the old sales incentive plan and the new plan	72.0%
5. Company sales incentive pay philosophy	71.3%

Once you get beyond the top five responses, however, three of the least prevalent responses are concerning. These three response options all deal specifically with the training and support designed to equip sales managers to lead their teams by leveraging the new sales incentive plan. As shown below, only one-third to one-half of surveyed organizations provide this level of support to their sales managers.

Sales Manager Training Topics - Less Prevalent Responses	% Indicating Topic is Addressed
10. How to coach employees to "win" under the new plan (e.g., the effort and behavior required to realize a sales incentive payout)	52.4%
13. How to have an effective conversation with employees about their payout under the plan relative to the performance attained	49.6%
15. How to talk with employees about sales incentive compensation and career planning (e.g., what employees can look forward to in higher level positions)	35.3%

Don't Keep Them Guessing

What I read into these survey results is that frontline sales managers are not being sufficiently supported when a new sales compensation plan is rolled out. Leaving your sales managers in the lurch is leaving too much to chance with the success of the new sales incentive plan riding on the outcome. Sales manager training needs to occur prior to rolling out the details to the entire sales force and should entail focused instruction (either in-person or via web conference) on the following elements:

• The company's overall business objectives and how the new sales incentive plan supports them
• The rationale for the incentive plan change (i.e., why it's good for the company and good for the sales force)
• The key differences between the old and the new plan
• The detailed elements of the plan (e.g., from target cash compensation and pay mix levels, to the performance measures and incentive mechanics)
• How to calculate incentive earnings under the plan
• Key governing terms and conditions, particularly those that are new (e.g., sales crediting rules, eligibility guidelines, etc.)
• The next steps and sales management's role in the ongoing rollout process (e.g., implementation timing, the supporting communications tools, the goal setting process, employee training and communication events)
• How to manage and elevate performance using the new sales incentive plan.

The sales compensation plan can be an effective tool for managing and directing sales performance. However, if sales managers aren't equipped to use that tool, the motivational impact of the sales incentive plan will be sub-optimized. In short, sales managers need every opportunity to buy-in to the new sales incentive plan up-front in order to be the effective change agents the organization needs them to be.