Sales Incentive Plans: There's Still Time to Get Comp Right

Business, like nature, is governed by cycles. And just like nature, the planning and preparation for the next season occurs long before the season begins.

For those brave souls in charge of designing and implementing sales incentive plans, it’s not too late. The window is closing fast, but there's still time to get comp right for 2019. The new year will bring SKOs, new sales strategies, new product launches, and likely new sales roles. And connecting all of these must be a clear system of incentives and rewards.

Designing high-performing sales incentive plans is no small order. From our decades of experience, we’ve put together a definitive sales comp guide and calendar. Use this guide to keep your process on track.  

We’ve listed the quarters in chronological order below. If your company operates on a different fiscal calendar, adjust the quarters accordingly.

Q1 January – March: Roll Out, Communication, Quota Distribution

The focus of Q1 is on practical plan roll out activities. New plan launch often comes at the annual sales kick off meeting. At a minimum, the SKO should include a discussion of the strategy the plan will support and whether there are any big changes. In addition, good program rollouts will include:

• One major, high-level announcement from the CEO or CSO
• Town hall meetings, small group discussions between sales teams and managers, one-on-ones between managers and sales people
• Distribution of collateral, including plan calculators, explanation of plan and benefits, FAQs, infographics, and where to direct questions

Following formal launch, the real work begins. The focus shifts to thoughtful assessment activities. A good assessment approach will address many questions:

• After 30 days, do people understand the plan? (usually done through a quick, three-question survey or manager interviews)
• After 60 days, are people changing their behavior? It is the right behavior?
• After 90 days, do the sales results show the plan is working?

Another assessment tactic is an organization-wide survey asking:

• How is the plan working?
• Does the plan align to your role?
• Do you feel you are incented for what you’re supposed to do?
• Do you feel the plan is fair?

Of course, sales ops and enablement can expect to hear complaints: ‘The quotas are too high!’, ‘Base salaries are too low!’ These grumblings are very common across companies, industries, and geographies. Sales leaders will have to discern if the moaning has any merit.

For the record, we do not recommend mid-year quota changes unless there’s some unusual circumstance like a major change in customers. Usually, these complaints can be answered with increased communication about how the goals were set.

Q2 April – June: Forensics, Any Plan Changes

During the second quarter, it’s time to dig into the analytics and understand what’s working and what’s not. Look for data that answers:

• Is the incentive plan driving the desired behaviors?
• How are the sales people performing?
• What is performance to goal?
• Are 50%-70% of people hitting their goal?
• Are the high performers earning more than the low performers?
• Are there any major red flags?

These mid-year analytics and qualitative feedback points provide the foundation for next year’s planning. A solid review of the current state let’s you see what’s working and what needs to change. Work in this quarter will also help you decide if you need to bring in a sales compensation consultant to help with next year’s sales incentive plans.

In terms of potential changes, the governance committee should meet once a quarter. Their focus should be on evaluating any feedback and assessing the need for incentive plan design changes. Similar to quotas, we don’t recommend mid-year changes to the plan or commission rates without a very good reason. If the committee decides something needs to change, that work also needs to be done in Q2.

Q3 July – September: Feedback, Preparation for Next Year’s Plan

The process of gathering plan feedback should be a year-round effort, but it shifts into high gear during Q3.

• Conduct another short survey to gather feedback about how the incentive plan is working and compare the results to those from the Q1 data.
• Encourage managers to have one-on-one meetings with sales reps.
• Consider non-cash rewards and recognition programs to offset any discrepancies in the comp plan, as opposed to making any changes in the incentive plan.

Now is also the time to start getting serious about next year’s sales incentive plans. If you wait until Q4, you may not have time to design a plan that supports the strategy. Meet with cross-functional business leaders about the strategic direction for the company. Ask:

• What is the direction for the business for the next 12-18 months?
• What are the financial objectives? Product strategy? Market strategy?
• Are there any upcoming major shifts in products or markets that would impact the compensation plan? Are any workforce reductions planned? Any potential acquisitions?
• How will the strategy impact sales roles? Are the current roles correct for the sales strategy? Do we need any additional roles? Do we need to re-figure any accounts?

Finally, the sales comp team should collect the data from these leadership conversations, manager/rep feedback, short surveys, and relevant performance data.

A word about quotas: according to our research, 70% of companies do not have their quotas ready until late January. Evaluate your goal-setting process, ensure you can get the right data, and make any necessary changes.

Q4 October – December: Calculations and Communications

During Q4, sales leadership needs to figure out how to pay the sales people and set the quotas (assuming you’ve already done the work around strategy and coverage).

If you're making any big changes, begin communication around those changes 60-90 days in advance and continue until 90 days post change.

• If the changes are minor, you still need to communicate that no major changes are going on, preferably about 30 days before roll out.
• Plan communication moves right into Q1, and the cycle begins again.

Moving Past the Last-Minute Drill

Sales compensation has evolved into a sophisticated science in the highest-performing sales organizations. Dedicated teams spend the entire year monitoring, responding, and continuously improving their sales incentive plans. New and innovative incentive strategies emerge every day. Managing an ongoing system of feedback and analytics is critical.

Contact us to assess the health of your comp design and planning cycle. We can also share the latest insights for using incentives to drive greater sales productivity for reps and managers.