If you struggle with the same question, you're not alone. In WorldatWork's annual Survey of Sales Compensation Practices which I co-author, we find that the vast majority of companies change their sales compensation plan every year. Do the majority of companies really like changing their sales plan each year or are there other factors compelling them to do so? I submit it's the latter, which makes the task of swimming against that tide quite difficult. Nevertheless, this month's article attempts to highlight a few tips for getting more mileage out of your sales compensation plan without it becoming stale or obsolete. I hope you find it valuable and please share with me topics you'd be interested in reading about in future newsletters.

Best regards,

J. Mark Davis
Managing Principal
Valitus Group, Inc.

Why is that sales compensation plans change so frequently? There are many different factors that can ultimately affect the need to change a sales compensation plan. In an earlier article I wrote entitled, "The Myth of Planned Obsolescence," I argued that even the best sales incentive plan will eventually become obsolete. For most businesses, this simply is a reflection of operating in an increasingly dynamic, fluid business environment. Often the need to change sales compensation comes down to changes in business objectives and/or go-to-market strategy. The downstream list of tactical shifts those upstream changes can cause is infinite, including the need to change the sales compensation plan.

In its 2008 Survey of Sales Compensation Practices, WorldatWork found that 76% of companies change their plan every year, with adapting to changes in business strategy being the primary reason cited for the change. So it's well established that plan change is a given. However, we also know that plan change can be painful in terms of the time required to design and launch a new plan, as well as the potential disruption to the sales force the new plan is intended to motivate. How then do we design a sales compensation plan with a longer shelf life than just one year? It's not easy and, in many cases, may not be possible. Even so, here are a few tips for extending the "best if used by" date of your sales compensation plans:

• Identify forward-looking business objectives – Ensure that the plan reflects contemporary business objectives and the intended role of the sales force in achieving them.
• Define selling roles that will have a longer shelf life – In addition to reflecting contemporary business objectives, role definition also must anticipate whether your product/service offering or customer requirements are likely to change.
• Ensure the basics of the plan are well-connected to the business strategy – Focus on ensuring the core plan elements (i.e., pay mix, leverage, and performance measures) are sound relative to business objectives and role definition.
• Keep it simple – While clearly-defined and highly specialized roles allow for a more targeted and compelling incentive plan, a greater degree of incentive plan specialization is likely to require change sooner.
• Actively monitor plan performance – Stay on top of the need for minor plan tweaks as you go along as opposed to letting small problems fester and result in the need for change on a larger scale.

The level of plan change makes a difference. Making minor plan adjustments each year is to be expected. These could include adjustments to the leverage multiple, performance measure weighting, and performance range that leave the core plan construct in tact. More significant changes include those to performance measures and incentive formula which, more often than not, fundamentally alter the plan.

Above all, don’t let the compensation plan become stale or obsolete. Even though change can be painful, the plan must continue to reflect contemporary business objectives and role definitions. It’s a delicate balance that requires proactive management.

Rick Stanton
Vice President, Business Development
WesCorp

1. Defined project leadership - In this most involved level of engagement, I work closely with a defined team of stakeholders to lead the process of designing and implementing new sales compensation plans.
2. Monthly retainer - Clients have unlimited access to my expertise as I provide "over-the-shoulder" support to the internal sales compensation design effort by providing guidance, critiquing plan recommendations, and generally helping to keep the process moving.
3. In-house workshop - Intended to jump-start an internal sales comp design effort, I work with the key stakeholders over the course of one to two days presenting best practice insights, critiquing your current sales comp plans, and providing directional recommendations for change.

Because sales compensation projects vary, clients have chosen just one of these options or a combination of all of all three. My mission is to structure my engagements to add value in a way that makes the most sense for an individual client situation. Contact me if you'd like to schedule a call to discuss your situation.

Mark also is a contributing author to The Sales Compensation Handbook - Second Edition. Order this seminal text on Amazon.com.