How do you maintain accurate sales compensation policies?

Companies should also move away from the traditional "base + commission" approach. It's not a fair way to measure performance. Measuring sales activity through Leading Indicators, is far more effective thank measuring Lagging Indicators, which are simply based on the numbers. Leading Indicators cover sales activities like sales meetings, sales calls, networking events, follow up calls and visits to existing clients.

I disagree that there are only 2 elements to get this right. I agree that you must understand how different individuals are motivated - extrinsically (money, rewards, recognition) or intrinsically (satisfaction of doing a great job, being the best they can be, etc) or a combination, but it isn't JUST about the KPIs of activity. Salespeople fail for two reasons: 1) They don't do enough of the right stuff. 2) They do enough of the right stuff but they aren't very good at it. So absolutely focus on the "right stuff" via KPIs, because that is the first step, but then they gotta be coached, trained, deal with the voices inside their head, etc. A combination of KPIs and closed business can work great.

There are 2 elements to consider for companies to get this right: 1. How is the individual motivated 2. KPI's focussed on sales activity 1. It is a false assumption that all sales people are motivated by money. This can be avoided by simply asking each team member the following questions: how are you motivated? What kind of rewards and/or recognition might motivate you to perform at your best? If we were to incentivise you, what might that look like? 2. Sales KPI's should be based on sales activity, rather than results. Measuring such activities as: sales meetings held, networking events attended, follow up calls conducted, are a few excellent measures. If you measure the activity, the results will take care of themselves.

Salespeople are not created equal and that requires different compensation for different types of salespeople and different roles. For example, a salesperson who is extrinsically motivated will want and thrive on a plan that is weighted more heavily towards commissions. An intrinsically motivated salesperson will want and thrive on a plan that is weighted more heavily towards a salary. While pay on leading indicators rewards salespeople who do the right things, there are way too many salespeople doing the right things but doing the right things don't help ineffective salespeople to close business.

Start by understanding your sales strategy and goals when crafting or revising your sales payment structure. Ask yourself the aim of the sales incentive scheme. Consider how to spur your sales team and managers. Think about the actions and results that should be encouraged or deterred. Let your pay strategy mirror your sales ethos, values, and priorities, and make sure it correlates with your overarching business objectives.

Why not talk to the individual sales person and understand what they are seeking to achieve in their personal lives and whether they need more money or maybe they would like to be compensated in other ways / I knew a sales person who just wanted a better company car or to fly a better class of travel. Tailor your reward mechanism to the invidual

Determine the components of the compensation plan (base salary, commission, bonus, incentives, etc.). Set the weightage and allocation of each component based on business objectives and market standards. Consider factors such as job role, sales target, performance metrics, and desired outcomes.

Sales compensation plans are unique to the specific organization, but you may come across the following terms and concepts as you start the development process. Sales Quota, On-target Earnings, Sales Accelerator, Sales Decelerators, Clawbacks, Sales Performance Incentive Fund or Sales Contests (SPIFs) in addition with Micromanagement, are priceless topics for efficient compensation plan.

When establishing and implementing a performance-based pay system, it is advisable to involve various stakeholders and departments. This helps to prevent errors and oversight of important details. Based on my experience, the Human Resources department has proven to be a valuable partner, as they have assisted in clarifying uncertainties and addressing ambiguities with their precision and thoughtful inquiries.

HR & business leaders must know the importance of communication and transparency. Today employees want to know what the organization’s pay strategies are. If companies keep them in the dark, employees may fill the information void with gossip or grapevine feedback, they may think more about leaving for another organization, or they may discuss pay with a union representative. Companies will be well-served to create and maintain open channels of dialogue with staff to ensure that employees are receiving timely, factual, and relevant information about their pay. They (employees), are the only appreciating asset on a company’s balance sheet. Pay is an investment in this appreciating asset.

How can our compensation plan help you reach for the stars? ?? What sets our commission structure apart from the competition? ?? Why should you care about our performance metrics? ?? What's in it for you beyond financial rewards? ?? Why do we prioritize transparent communication? ??? How will this compensation plan fuel our collective success? ??

Allow sales leadership to communicate to sales people. Allow other incentivized teams to hear from their leadership. This must be done on a regular basis showing top payouts and averages so that your constituency BELIEVES that they too can succeed within the plan. BELIEF inspires exceptional behavior and performance.

Besides clear and consistent communication, timing plays a crucial role. When it comes to altering the current performance bonus system, it's a good idea to have a gap of at least one calendar month between the communication and the actual rollout of the new bonus structure. Ideally, from my own experience, I'd even suggest two months if possible. For our sales team, a longer period helps ease any concerns because it gives them enough time to ask questions and get familiar with the details. Additionally, this interim period allows our sales reps to adjust their strategies and pipelines accordingly.

What metrics are most important to track when monitoring your compensation plan? ?? How can you ensure consistency in tracking and measuring compensation plan performance? ?? What are some warning signs that your compensation plan needs adjustments? ?? How often should you review and adjust your compensation plan? ??? Why is it important to communicate any changes to your compensation plan clearly to your team? ???

You must inspect what you expect based on the purpose of the plan. Critical is for the plan to be adaptable based on environmental changes that WILL take place. It’s not about being FAIR it’s about be CONSISTENT.

Compensation metrics are the tools used to measure, analyze, & decide how effective the compensation practices/policies are & what a company can do to improve them. They help so as to “understand how pay is distributed across each team, so they can make informed decisions that will help them attract & keep employees.” Compensation formulas help organisations create effective pay structures and help people organisation understand them. This knowledge will make it easier for managers to manage pay on their teams & help their team members understand what they can do to increase it.It is even more important that this information enables managers, HR staff/others to have critical conversations with employees to help them understand their pay.

Company Goals & Structures Beyond products, how do you need the team to function? Structure (Hunters, Farmers etc), Workload, Alignment. Is it realistic? Effective? What data do you need? Does the current situation meet the need? Listen Direct Team Communication. What would they want beyond money? What data best displays their effectiveness? They work within the systems and data every day. Identify gaps in data, areas of improvement and develop ideas that are more likely to motivate. Be Transparent Often plans are hard to calculate or understand fully. Don't overcomplicate, use accessible communication, provide data-linked calculators. Communicate directly with those affected. Use the information to drive your decision-making.

When we have decided to automate & streamline business processes & compensation, & we know what goals the automation is supposed to achieve, we can put together a road map for our project. To do this, several areas need to be thoroughly considered: Create business process & workflow maps, identify processes & compensation for digitisation. Define the requirements for digitisation & automation software for your business needs (Business Process Automation Platform, Business Process Management Platform).Select software to support process according to predefined requirements. Define KPIs to gauge the achievement of predefined digitisation milestones. Start implementing a pilot business process or compensation also.

One thing is that a company must take the time to build context. Must also explain the purpose of doing compensation reviews. Tell to employees how compensation structure created, based on internal, external & individual equity. They must know the process is fair & open & who to talk to if they have questions about it. Company must communicate the value of compensation reviews to the individual. Usually, companies align compensation to performance, so this is about more than ‘just money.’ It’s about the value of your job & more importantly, your performance to the organisation. It’s about how your career will grow within the company. Without the why, you can have the best model & no one will value it.

AI also, can add significant value to the process by improving accuracy, speed & efficiency, while enabling cost savings and optimal compensation strategies. AI, with its machine learning algorithms, can distill useful information from massive amounts of data, finding patterns and analyzing at a level & speed not possible with conventional means. It can provide real-time insights to enable fact-based decisions, reduce bias, risk & promote fairness in the workplace. AI can help with setting meaningful goals, ensuring competitive pay & tracking program effectiveness. In a myriad of ways, it can improve HR efficiency, boost productivity, profitability & improve employee satisfaction.AI can take the operations-performance to the next level.