Not a Member? Get access to HR news and resources that you can trust.
Don't leave the task of calculating total cost of workforce to the finance department.
Is your employee handbook ready for the changing world of work? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
60+ new SHRM Seminar dates in 10 U.S. cities and virtually.
Expand your influence and learn how to become an effective leader -- Join us in Phoenix, AZ, October 2-4, 2017.
A change in sales compensation is often heard as “They’ve found a way to pay me less”
If you ask a typical sales compensation professional to describe the requirements of the job, the list will usually include these things:
In the vast majority of organizations, more than 80 percent of the incentive plan design timeline is devoted to the development of the plan, leaving less than 20 percent of the time to roll it out. Most organizations will budget around two to three months from start to finish for a new compensation plan design process. Assuming a 12-week timeline, this means that 10 weeks will be spent on strategy development, data collection, plan designs and plan modeling—and only two weeks will be spent developing the communication and training documents needed to roll out the plan to the sales force.
For big changes (new metrics, changes in strategy, etc.), the change management portion of the plan design process is at least as important as the changes themselves. Consider an announcement that the compensation plan will be updated:
We are moving from a commission-based plan to a goal-based plan. This will equalize earnings opportunities because now everyone will be asked to deliver a number that is based on the potential in your territory. This makes the plan fairer and helps ensure everyone has a realistic objective.
How might top-performing salespeople feel after hearing this announcement? “They’re not going to do this,” they might say. “No way! I built my territory from scratch!” After some time passes and the reps realize the change is going to happen, the next reaction is anger or blame. “Really!? I can’t believe they’re going through with this. Whose idea was this? Do they even know anything about sales comp?”
Our goal as sales compensation professionals in rolling out new plans is to reduce the depth and length of the trough in which salespeople are experiencing negative feelings toward the changes and may be actively fighting them.
Overcoming Lack of Trust
One issue often faced by organizations is that salespeople don’t trust what Headquarters says. At many organizations, a change in compensation is immediately translated to “They’ve found a way to pay me less” or “They’re going to make me work harder to earn the same amount.” It’s critically important for the company to understand the salesperson’s perspective and to craft the communication accordingly. How do we overcome this mistrust?
When Headquarters shows up with a change to the sales incentive plan, reps look to their first-line managers (and perhaps their peers) to understand whether the change is good for them. First-line managers should always play a critical role in the rollout of the plan, sitting down with their salespeople in one-on-one sessions to talk through what the plan means for them.
Rep advisory boards should be involved on the front end of the design process, providing input about what’s working and what’s not working. More important, people in this role can play a critical part in rolling out the new plans to the sales field. Including them in the communication of the plan, given their level of respect and credibility from their peers, will go a long way toward getting salespeople to adopt the new plan and to believe that it is in their best interest as much as it is in the company’s.
Key Considerations During Change Management
Sales compensation is how the sales force makes anywhere from 15 percent to more than 70 percent of its pay. Any change affecting a significant portion of an employee’s pay is bound to be met with resistance. As you roll out the plan to the sales force, focus on these three key points.
What they should know. Plan rollouts and plan documentation must provide detailed examples of how incentives are calculated under multiple scenarios.
What they should do. Give detailed examples not just of how calculations are done, but of what salespeople in specific situations can do to earn significant incentives.
For example, if you are changing the definition of high performer (at least as it relates to high incentive payouts), show a detailed, realistic example of how someone who is in the top 10 percent of earners today could change to move into the top 10 percent of earners under the new plan design. Explain how average performers must shift what they sell, how they sell, how they bundle, and so on, to show exactly how salespeople can maximize their incentive plan. Leave nothing to the imagination.
What they should feel. Companies should consider the “theme” with which they develop their incentive rollout documentation. Companies that want their salespeople to feel challenged and the desire to achieve may choose a sports-themed rollout. Pictures of mountain climbers summiting or marathoners running across the finish line will elicit a very specific feeling of accomplishment.
Or companies may want their salespeople to feel that they are part of a greater cause than just “selling.” Health care companies, for example, may want their salespeople to feel like they’re part of a team that is changing the industry and improving people’s lives. A large cardiology products company achieves this by bringing in patients each year to speak to the company and describe the impact the products have had on their lives and the lives of their loved ones. While this session is not specifically related to sales compensation, the company sends a lot of its sales force to the meeting, and they depart knowing their job is not merely to sell but to save and extend lives.
Once the plan has been rolled out, ensure that the communication of the incentive plan is not “one and done.” One example is to include a town hall–style phone Q&A once salespeople have received their first paycheck.
Another tactic is to provide plan reminders in whatever system your salespeople are likely to access every day—most likely the customer relationship management system or the company’s intranet. Provide tips, stories, examples, and so on, showing how the plan has worked for other salespeople in the organization.
Steve Marley and Chad Albrecht are principals with global sales and marketing firm
ZS Associates in Chicago. Both are leaders in the firm’s sales compensation practice. They can be reached via e-mail at
email@example.com. This article is excerpted from their new book
The Future of Sales Compensation (2016, ZS Associates).
Related SHRM Article
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Join SHRM's exclusive peer-to-peer social network
SHRM’s HR Vendor Directory contains over 3,200 companies