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How Well Does Your Compensation Plan Support Your Strategy?

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Getting your team to focus on the right customers and elements of your strategy can be difficult. Your compensation plan can be a great tool to assist you in getting your strategy implemented and the sales results you want.

Companies that do not use their compensation plan or develop one with serious flaws are losing valuable sales opportunities and lowering the likelihood of their strategy being implemented.

Designing compensation plans takes time and effort if you want to get it right. Relying on carry-over plans from the previous year will not support you. When you believe you can use last year’s compensation plan to support your new strategy, then there is a red flag warning you are not taking advantage of this great opportunity with your team.

Compensation plans aligned to strategy implementation are not simple tasks to complete. There are some very fundamental errors that people make, year in and year out, attempting to get it right. Those errors have an enormous cost to team motivation and the overall credibility of the company.

Here are the most common mistakes made that just ruin a perfectly good compensation plan.

Mistake #1 – Make it Complicated

Typically we see this when people attempt to make changes to last year’s plan; that was already flawed, or they want to make the salespeople jump through hoops to earn a little extra cash. A complicated compensation plan is your fastest route to disaster. Complications arise from too many variables, too many calculations, and shifting goalposts throughout the year, with the end result a disengaged team who cannot work out what is due to them.

Mistake #2 -Don’t Align Your Metrics with Your Strategy

Another way to make sure your strategy won’t be implemented is not to align your compensation metrics with the behaviours needed to deliver the plan. Let people adopt behaviours and productivity that work in opposition to what you want to achieve, then reward them for it. Reward them for the wrong activity.

3) Mistake #3 -Design Your Plan Like a Contract

If you want to stop salespeople from reading the plan and being focused on achievement, make the plan look like a contract full of fine print. A plan should look like a marketing asset, not a contract. That will inspire your team immediately.

Mistake #4 -Use Metrics You Can’t Accurately Track

If you really want to make it difficult for salespeople, base their compensation on metrics that are difficult or impossible to track. That will instantly kill your compensation plan and lose the company’s credibility with the team. In fact, you may even get some resignations from your good performers. Difficult metrics to track are those that are dynamic, estimated, subjective, or incomplete. Imagine the time they will invest in reviewing and fixing their commission reports instead of selling too.

Mistake #5 -Make it Difficult for Salespeople to See Where They Stand

One of the best things you could do if you’re aiming for an ineffective compensation plan is to keep performance hidden. You need to provide a live dashboard so salespeople can see how they are performing. Let them know how close they are to sales goals at all times. It will not only assist in motivating them but also alert managers to those who may need assistance. That is the key to success, not failure.

Mistake #6 –Change the Strategy Mid-Year Whilst Leaving the Plan the Rigid

It is a tough market out there, and sometimes changes need to be made to the strategy to remain competitive. A rigid compensation plan with a fluid strategy is a great way to lower productivity in your sales team. You can even penalise the salespeople for not delivering as they work to the old playbook.

7) Mistake #7 –Make the Goals Unachievable

Get the idea that if you offer a big enough carrot, the team will jump to great heights to win. You can also make your job more difficult by failing to take into account staff turnover, onboarding time for new hires, and other potential challenges that need to be planned for in advance.

Designing plans is more than just offering an annual incentive or a commission on a sales level. They must be carefully balanced with business requirements, strategy implementation, and customer strategy if you are delivering results and retaining a motivated and engaged team working with you.

If you would like to discuss compensation planning, please connect with us via the contact our office.

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About the Author: Adele Crane

A leader in Implementation Consulting.
CEOs and Managing Directors have relied on Adele Crane to solve challenges with the performance of their sales and marketing since 1990. Her consulting experience in delivering results in 90-120 days is unprecedented by any other known sales and marketing consulting professional in the world. As an author of 3 acclaimed books, appearances on major media, and publications in USA, NZ and Australia, Adele’s experience brings fresh thinking and contemporary practices to business.