- Multiple powerful stakeholders with differing points of view can complicate sales compensation planning
- Late starts in planning thrust sales leaders into rush mode, causing issues with planning
- Align on strategic interests to unify stakeholders and improve communications
Every year, like taxes and Groundhog Day, compensation planning season predictably arrives. For many sales leaders, the process feels like a series of compromises. Often contentious, and inevitably unsatisfying.
How can we avoid experiencing Bill Murray’s Groundhog Day when planning sales compensation? First, we must diagnose what’s causing difficulties. Then, we can design a way to mitigate them. Our research has identified five common pitfalls:
- Sales leaders are getting a late start. People procrastinate tasks they expect to be unpleasant. Because of this or other reasons, many compensation planning processes don’t get underway until Q4. This puts sales leaders under immediate pressure to start producing plans, robbing them of the time they should be spending on infusing strategic imperatives into the planning process.
- The work is inherently complex. You can’t just insert a coin into a planning machine and out pops great compensation plans that everyone loves.
- It’s an emotional, high-stakes topic. Variable compensation consumes significant budget. There’s no way to guarantee that the choices you make will drive desired outcomes. Big mistakes can cost a sales leader his or her job. No one wants to overspend, but wouldn’t it be worse to discover you underspent by 10%? It’s a rock and a hard place.
- Everyone has natural biases. Every stakeholder brings unique experience (or lack thereof), and each pursues his or her own agenda. Strategic CFOs want to pay well for results, but they also feel pressure to contain spend. Product leaders seek to ensure that sales sells enough of each product or product family. The more products there are, the greater the concern that something gets ignored. The sales leadership team needs to deliver plans that drive focus and reward behaviors required to hit the overall number and any subsidiary goals. But plans must be simple enough to avoid mixed messages and unintended consequences.
- Systematic methods for infusing strategy into compensation plans are lacking. Without the right foundation, including a charter, unraveling the preceding pitfalls proves elusive. This also holds true when events force midstream changes, like in our current crisis situation. You can’t navigate choppy seas without a strategic rudder.
No wonder it’s brutal.
To learn how you can use the SiriusDecisions Sales Compensation Model to address the typical challenges of compensation planning, join Steve Silver and me for our session at Summit next month. This year, for the first time ever, we’re presenting an immersive virtual Summit with more than 120 sessions. No travel required, no time slot restrictions. You can choose what to consume whenever it suits you best. We look forward to seeing you!