It’s sales comp design season (yay!), which means long days, frequent meetings, and calculators.
It also means facing some of the same old compensation demons, who resurface every year to throw a wrench in comp plans with even the best of intentions. Let’s take a look at a few, and how to slay them.
1. Plan Complexity. One of the first is the complexity of the plan. For any organization that’s been around for more than a year or two or has complex products or services, the plan itself tends to get complex as well. It just happens naturally over time.
But often, people at these companies don’t understand the compensation plan. It really happens at two levels: people don’t understand the compensation plan; and the plan itself is too complex to administer as a business. We’re trying to track – and pay people – on multiple measures. Or, we’ve got mechanics in the plan that are creating complexity because we’ve got hurdles, or thresholds, or gates, or multipliers that make the plan a lot more complex.
You might even have a plan that has just two or three measures. We hear, “It’s a simple plan. It’s only got three measures.” But once you really look, each measure has different gates in it which makes it hard for the rep to understand how they’re going to get paid.
Look at line of sight. Does the rep know when they close a sale what they’re going to make, or how it’s going to contribute to their quota? If the answer is no, the plan is too complex.
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