Communication Essentials

Transcription

1 By Joseph DiMisa B lood, sweat, tears weeks number crunching. That s what it takes to design a great sales compensation plan. But once plan design is approved, n what? Too many companies stop right re fail to take next step marketing plan to sales ce. Untunately, no matter how elegant seemingly intuitive design, a sales compensation plan that is not properly implemented communicated runs risk being misunderstood underachieved. Even best compensation plans must be sold to field. If sales representatives do not have a clear idea what to do why to do it, y may continue in pt patterns rar than change ir behavior to take on new set challenges required to meet new sales plan. Research shows that five leverage points hold improving ROI a pay permance system. These include knowledge be pay, total pay, permance, external market comparison, access to pay inmation. So to boost pay satisfaction permance productivity open up compensation black box let pay plan gain traction in field. Effective marketing starts a clean message about desired sales goals clearly communicates objectives, metrics, mechanics sales compensation plan, allowing sales reps to see link between sales strategy, ir behavior, ir earnings opportunities. As critical message, is medium in which it is delivered. Perhaps more so than any or employee group, sales reps need to get message in a personal um mat. Sales compensation is driven by individual so higher touch in communication, more message hits home stays re. Communication Essentials Four topics must be addressed in any plan communication: Strategic objectives Plan components Compensation mechanics Incentive calculators/examples

2 Each topic interlinks ors to deliver support a comprehensive message about Why?, What?, How?, most importantly, How Much? sales compensation plan. The communication mes approach should align new sales compensation plan organization s strategy business issues. Including four topics in plan communication helps sales representatives to more fully underst what results sales organization must achieve in plan year, what behaviors are required to achieve results, how success will be rewarded. Strategic Objectives Explain Why Presenting a strategic overview to compensation plan is fundamental. To buy into plan internalize it, sales reps must underst strategies business issues facing company, role response required by sales organization to address se strategies contribute to company s success. The communication must explain both strategic financial objectives, providing sales representatives a clear understing how success is defined. The discussion strategic objectives should also validate how new sales compensation plan supports strategies objectives organization by driving correct behaviors among sales ce. It is valuable to explain compensation philosophy employed to develop design sales incentive plan. The discussion can furr emphize objectives expectations sales organization s permance over coming fiscal year. If new plan differs significantly from previous plans, explain changes /or enhancements to new plan. Depending on audience shift in sales strategy or compensation design, highlight steps /or players in design process. For example, if credibility is an issue, stress that focus groups or interviews reps were integral to design process. Differentiating new plan from legacy compensation plans explaining methodology will help field ce fully appreciate degree to which y may need to change ir sales behaviors activities to drive company s sales results, ultimately, ir own financial success. Plan Components Identify What Next, outline nuts bolts new sales incentive plan, detailing included jobs, compensation levels (be salary incentive), pay mix, permance meures, meurement/pay periods. Clearly defining permance meures ensures that sales reps underst which products, types revenue, /or types sales objectives to focus on. Explain weightings each meures ( a percent total sales incentive) to let reps know where to focus ir sales attention energy. Exhibit 1 shows a simple, but effective visual what plan components are how y work toger. 2

3 EXHIBIT 1: DISPLAYING THE NUTS BOLTS OF THE SALES COMPENSATION PLAN Major Account Executive Job Role Meures Weights Mechanics Links Negotiate Negotiate contractual contractual agreements agreements high high prile prile strategic strategic Build Build strengn strengn relations relations through through effective effective account account management management Linkage Total Revenue 50% Incentive $20,000 Meurement Payment YTD Annual Quarterly Mix Upside Total Incentive 40% Total Compensation $40,000 New Customer Revenue 30% Incentive $12,000 Pay Mix Current TTC Upside MEASURE 1 MEASURE 2 Mechanic Type Quota Mechanic Type Quota Threshold 50% Threshold Step - 50% Cap Cap Accelerated Bed on 100% Accelerated Bed on 100% Attainment first Attainment first 2 2 meures meures Bed on MPS Linkage Meurement Payment YTD Annual Quarterly Payout at Excellence 1 Mechanic Type Threshold Cap Linkage Meurement Payment 60/40 $100, X 200% Strategic Product 20% Incentive $8,000 MEASURE 3 Objective Yes Annual Annual 2 Job Job Role: Role: Brief Brief summary summary description description responsibilities responsibilities accountabilities accountabilities position. position. Mix Mix Upside: Upside: The The current current pay pay mix mix upside upside position position well well proposed proposed at at excellence excellence (200% (200% target). target). Meures Meures Weights: Weights: Proposed Proposed permance permance meures meures weights. weights. Mechanics Mechanics Links: Links: Detail Detail mechanic mechanic type, type, thresholds, thresholds, caps caps accelerators accelerators meurement meurement periods. periods. Plan Mechanics Focus on How Plan mechanics detail how incentives actually pay out, given sales rep s level achievement. Include mul /or rate tables to emphize levels corresponding levels sales achievement. Stress selling points plan, e.g., no cap unlimited earnings potential, accelerators, premiums certain products, etc. See Exhibit 2 an illustration a curve that communicates earnings opportunities available under a plan. EXHIBIT 2: ONE APPROACH TO EXPLAINING THE HOW Upside Represents Desired Acceleration Above-Target Permance + $60K 2 : 1 Upside $30K Target Variable Comp Top 10% Permers TTC $100K $70K Be Comp 0% 100% 150% Permance Excellence Point Actual compensation $160K ($70K in be, $90K in variable) at excellence point. 3

4 Plan Calculators/Examples Illustrate How Much communication is complete out sample calculations incentive s under different sales achievement scenarios. As soon most sales reps learn a new plan, y break out ir calculators to underst how it will impact ir bottom line, but not all m get calculation correct first time. Sample calculations are a simple way to control errors so plan participants can underst full value potential new compensation plan. Examples allow reps to see, in real terms, how plan will affect m what behaviors are necessary to maximize earnings achieve greatest rewards. Exhibit 3 displays an illustrative Compensation Calculator. EXHIBIT 3: COMPENSATION PLAN CALCULATOR Section 1: Enter Be Salary Total Target Incentive in Column E Total Year-to-Date Compensation $122,728 Be Salary $85,000 Total Target Incentive $135,000 Total Target Compensation $220, % 300% 250% Quota Achievement vs. Total Variable Payout Section 2: Enter License Revenue Quota in Column E Annual License Revenue Quota $1,900, % Section 3: Enter Quarterly License Revenue Achievement in Column C License Revenue Sales Credit YTD Achievement Earned Incentive Q1 $440,000 23% $18,758 Q2 $558,000 53% $24,471 Q3 150% 100% 50% 53% 59% Q4 Total $998,000 53% $43,228 0% Semi-Annual Revenue Target Semi-Annual Bonus Sales Credit YTD Achievement Earned Incentive Q1 Q2 $950,000 $998,000 53% $27,000 Q3 Q4 $950,000 Total $1,900,000 $998,000 53% $27,000 New Account Bonus Section 4: Enter number new accounts gained in each quarter in Column C Achievement Earned Incentive Q1 0 $0 Q2 1 $10,000 Q3 0 $0 Q4 0 $0 Total 1 $10,000 Total Incentive Compensation Earned Incentive YTD Achievement Q1 $18,758 14% Q2 $61,471 59% Q3 #VALUE! Q4 #VALUE! Total $80,228 59% 4

5 If organization plans to provide any special incentives (e.g., SPIFs) outside new plan, communicate m separately. A separate, yet tem communication can create excitement about extra bells whistles out drawing attention from messages behaviors new sales compensation plan. Successful Communication Methods The mat used to communicate message is important message itself. Research shows that employees prefer to hear messages directly from ir supervisors, yet 80 percent time, communication about pay emanates from grapevine. Untunately, what gets psed on are or people s impressions dissatisfactions program. Within field ce, ccading communication can ensure understing, dispel dissatisfaction, create a receptive, motivating environment. An effective ccade starts at top, head sales outlining why strategy objectives behind plan. The is to really engage reps in se messages. Ideally, new plan should be rolled out at annual sales meeting, underscoring linkage between sales plan, compensation plan, required behaviors to make it all work. There is no underestimating rah-rah effect unveiling annual compensation plan in conjunction annual sales goals, new product introductions, or messages. Following big picture presentation, a large group um is also effective providing an overview plan mechanics not nitty-gritty, but essential how plan works messages that link up strategy. Communicating this overview can occur in Regional or District breakout groups. These sessions can be both inmation/qa ums well working sessions where teams engage in discussing tackling challenges. Back in field, a rep s manager should schedule a one-on-one each rep to focus on how to succeed under new plan. The two can engage in strategizing ways to maximize incentive opportunities. Written communication should serve a follow-up to group team rollout sessions. The material must echo group messages present plan mechanics in clear, straightward terms. Highlighted brochures or brief, to--point plan documents deliver critical messages most effectively, safeguard against confusion or misundersting. The challenge is to be succinct yet comprehensive, hitting upon all points critical to success compensation plan sales organization. Many organizations use ir written plan communication dual purposes communicating plan details well cramming in a laundry list administrative guidelines. Such details ten employ a heavy dosage legalese, wher actual legal regulations or simply business processes that require mal language. Documents written in mal, legal terms tend to be intimidating; y are difficult to read underst eily. Faced such a document, audience ten will skim it, possibly missing messages. The solution is to create two documents, a plan description 5

6 that markets plan, containing four essential topics, a companion piece that includes administrative guidelines. The guidelines may be matted a list Frequently Asked Questions that puts legal requirements or dry, but necessary terms conditions into a clearer, more eily understood context. The final issue may be to intranet or not to intranet. The answer depends on how sales ce accesses uses intranet. It is always a good idea to have plan details guidelines available on intranet reference. However, if your company prefers electronic communication to a hard-copy booklet, make sure plan highlights guidelines are also available in a downloadable PDF version a copy in h is ten eier to reference than one on intranet. * * * What is gamble involved in marketing sales compensation plan? Field sales will likely be more satisfied ir pay. Reps will underst why plan rewards certain behavior. The entire sales team will have motivation to pull toger to break through challenges strive peak permance. Given se outcomes, it clearly pays to market. Copyright 2007 by The Segal Group, Inc., parent The Segal Company. All rights reserved. Sibson Consulting is a division The Segal Company. 6