Your sales compensation plan is the key motivator and driver of your sales team and if you are a new Head of Sales joining the business, there will be high expectations placed upon your success. Much of that success will need to come from aligning the compensation plan to the goals of the business. However, issues can arise when you decide to recycle a plan instead of creating a new one that is fit-for-purpose. But why is this such an issue and how can you avoid this?
It is very common for organisations to simply re-use old plans year after year. Sales Assembly argues why would you want to reuse the same plan as last year? Your company, your team, your products and the market are not static, they constantly change and evolve and so too must your comp plan.
You don’t always have to start from scratch every year, but a copy/paste approach with a few updates to revenue goals and territories is not a review. And if your results from the previous year were not stellar, you should be doing a full review to determine the right compensation plan for your business. If you saw success in a previous business, it is tempting to want to recycle that compensation plan to try and replicate the success. However, this approach typically fails..
The purpose of a sales compensation plan is to incentivise the sales team to improve on the performance of the previous year. But what happens when you try to use a plan from another company without any consideration for your organisation's unique strategy and goals?
When a Head of Sales moves to a new business they will want to spend some time reviewing the existing compensation plan for a few months to understand how it works which includes the current performance, the improvements they need to make and if it aligns with the business objectives. Equally, when a CEO hires a new HOS, the importance of asking them how they have designed a plan in the past, and how they would change the plan to suit new business objectives is imperative.
New Head of Sales: A new Head of Sales is often hungry to prove themselves and hit sales targets, and that will mean they will want to review a comp. plan if it isn't performing. However, if this includes trying to bring over a previous comp. plan design from another business, this can be a huge mistake and can lead to unmet quotas, unhappy staff and missed revenue goals. It is likely that the organisation has a good amount of historical data to work from like existing sales team performance and even interviewing sales reps to understand how the comp. plan has been performing.
It is not uncommon that as a Head of sales, you may only have exposure to creating a limited number of different types of sales comp plans in your career. Most salespeople start on the receiving end of compensation as they move up in their career so they have little exposure to compensation design. Then even as you move up, you may only be given a very small data set and be expected to create a compensation plan that's going to help your team hit their targets and satisfy all the different stakeholders.
Sales compensation planning is not a one size fits all situation. The first step when moving into a new sales leader role should be to review the existing comp. plan performance.
We recommend that you look at the elements of your previous comp plan that were successful and look at how you can build upon that success. Equally, you should examine which parts did not work, and investigate why not.
You can do this by using historical sales data as well as in-depth market research. MaRS recommend the below key areas to review:
If you are ready to review your sales compensation plan, motiveOS are the experts in compensation plan design and have written the book on it - an eBook that is.
If you would like a more hands-on approach, we can help you design a data-led, best-practice compensation plan that is tailored to your business that will motivate your sales staff to achieve quota quarter-on-quarter. Contact us for a no-obligation chat and walk away with a fully developed sales compensation plan that your sales team will love.