Delivering effective, compelling Compensation Plans are essential to Kicking off a new sales year.  In order for Compensation Plans to have the desired impact, i.e., motivating salespeople to achieve company sales goals, the plans need to be SIMPLE. (This presupposes that you have already done the rigorous analyses to ensure that sales goals are both challenging and attainable – subject of another blog.) 

The following are critical success factors for a successful Comp Plan launch:

• A Plan should have no more than three compensation elements
  The fewer the number of elements the better and these should be laser focused on well thought out Strategic Sales Goals.  More than three will:
• • Dilute focus and cause confusion
  • Be more difficult to administer (geometrically with too many elements)
  • Precipitate comp issues and sales rep frustration
    
    
• The first page should explain the heart of the Comp Plan in simple English
  A rep should be able to view the key incentives of the Comp Plan on one page in simple terms.  Plans also need to accommodate legal nuances and definitions (e.g. Retention metrics, Commissionable Revenue etc.) These latter can be delineated in subsequent pages and should also be explained as clearly as possible by the manager.
  
  
• Reps should be able to calculate payout on the back of a napkin
  This should be the design objective.  It makes the plan more motivating and easier to administer as well.
  
  
• Plans need to include examples
  These examples should cover a realistic sales scenario involving all plan elements with projected payout calculations.  Examples bring the plan to life.

• Lastly, Plans should be delivered at Sales Kickoff with training
  There is nothing more motivating than delivering well architected and effective Comp Plans at the start of the sales year.  Conversely, delayed Comp Plans are costly in sales team motivation. Plans should be delivered by the relevant sales manager to his/her team with a review of the plan including examples.  Expect questions, but if the plans are simple and clear, these should be easy.