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Design, Communicate And Assess Your Sales Incentive Plan S Bardot 2010

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Design, Communicate And Assess Your Sales Incentive Plan S Bardot 2010

  1. 1. DESIGN, COMMUNICATE AND ASSESS YOUR SALES INCENTIVE PLAN PRACTICAL ASPECTS FOR HR MANAGERS Sandrine Bardot – CompensationInsider.com
  2. 2. Outline 2  Design         Linking design to company strategy Categories of targets General compensation aspects Compensation perspective on retention Other checkpoints for design Design ownership Some considerations on operations Communicate    Communication objectives What you need for effective communication Content of plan communication © 2013
  3. 3. Outline – cont’d 3  Assess     Plan members feedback General considerations Two approaches for plan assessment Example of ratios to track © 2013
  4. 4. Sales plan design 4 •        © 2013 Linking design to company strategy Categories of targets General compensation aspects Compensation perspective on retention Other checkpoints for design Design ownership Some considerations on operations
  5. 5. Linking design to company strategy 5  You want to :    Beyond revenue and profitability, examples of desired business results :      Manage a major portion of sales costs by linking selling success directly with compensation expenditures Drive top and bottom line performance New product / service offering Finding new accounts or retaining existing ones Focus on major accounts … Centralized approach vs. plans developed by Business Units ? © 2013
  6. 6. Categories of targets 6  Incorporate some non-financial metrics ?   Customer-centric Behaviours and activities related Consider length of sales cycle  Customer type (one-off consumer sale, repeat BtoB customer, direct sales or channel sales...)   How do you encourage team targets ?    If financial : Who receives it ? How do you measure it ? Is it included in the bonus or on top of it ? If non financial : What form will it take (e.g : a day out, a prize) ? Who gets it ? How do you emphasize and publicise team achievements ? © 2013
  7. 7. General compensation aspects 7   Competitive pay position vs. market Define the acceptable level of risk (ratio fixed/variable pay)    Security vs earnings expectancy What is the sales prominence and difficulty ? Earnings limitations ?  Link payment frequency to length of sales cycle  If it’s important, reward it through your plan © 2013
  8. 8. 8 Compensation perspective on retention  Build a comprehensive compensation and reward system :        Car policy “Challenges”, competitions Qualitative bonus ? “Stay-in” reward ? Stock options ? Pension, medical coverage, other fringe benefits Presidents’ Club Recognition, formal and informal © 2013
  9. 9. Other checkpoints for design 9  Keep it simple !  Test against “what if” scenarios.    Line of sight – have goals that are credible to the sales force Look for any unintentional behavior generated by the plan Have a formal escalation path and process for the management of exceptions © 2013
  10. 10. Design ownership 10  How to design your plan :  Internal design : Leverage collaborative efforts of Management, Finance, Sales and HR  Get buy-in  Time-consuming, power games   Outsource to consultant : Reduce the workload internally  Get external expertise  Could “miss” some important cultural aspects, cost  © 2013
  11. 11. Some considerations on operations 11  How to run your plan :  Build, maintain and operate internally Very adapted to your unique needs  Inflexible and hard-coded homegrown systems are often expensive to run and require lots of manual feed   Buy some external software and customize it Fast, easy and predictable  The risk is to redesign your processes to fit the software – it should be the other way around !  © 2013
  12. 12. Communicate 12 Communication objectives W hat you need for effective communication Content of plan communication © 2013
  13. 13. Communication objectives 13  Multiple vehicles / venues / communicators  Employees understand strategy and how the plan ties to it  Focus on behaviors that will lead to individual success  Make it personal  What if scenarios for employees in a learning environment : provide a simulation tool  Show a mock up of how the results will be communicated at the end of the fiscal year  Ensure consistency of data between tracking tool and performance measurement/payout calculation tool © 2013
  14. 14. 14 What you need for effective communication     Have a roll-out plan Focus on key milestones & deliverables of the plan Ensure you have senior management buy-in to your change approach and communication materials Request sample employee feedback before the roll-out to adapt your documents to their questions © 2013
  15. 15. Content of plan communication 15  Reference materials :      Presentation materials and training aids:     Statement of corporate compensation philosophy Detailed incentive plan description (including examples) Policies and territories management Plan Participant Approvals Executive overview presentation Question and answer document Simulation tool (performance tracking and payout simulation) On-going communication tools :   Email teasers about different components of the plan Best practices sharing… © 2013
  16. 16. Assess 16     © 2013 Plan members feedback General considerations Two approaches for plan assessment Example of ratios to track
  17. 17. Plan members feedback 17   Conduct employee focus groups to know how they react to the plan. Top 3 reasons why plans need improvement   Managers  Inadequate line of sight to individual effort  Payout/pay insufficient  Insufficient tie-in to individual performance Employees  Inadequate line of sight to individual effort  Poor payout history  Plan design complicated or inadequately communicated © 2013 Source : Hay
  18. 18. General considerations 18    “Wear & tear” effect in terms of motivation of the sales employees Evaluate the plan over a period of time to see if it drives the desired sales behaviors and goals The maximum life span of a plan should be 5/6 years © 2013
  19. 19. Two approaches for plan assessment 19  Employer analysis :      Cost and profitability Sales outcomes vs. goals, Drive desired behaviors ? Customer retention and attraction… Employee analysis :     Internal pay equity Quota & goal attainment difficulty Total pay levels vs. expected at individual level (compare to historical payouts) Perceived competitiveness of plan (external equity)… © 2013
  20. 20. Example of ratios to track 20   In parallel, analyse :  Sales goal vs actual performance  And target vs actual pay  This will check alignment between the degree of attainment of company goals, and resulting payment for participants Payout distribution :  For good motivation effect, 60 to 70% of population should reach 100% or more of their quotas.  Ensure top performers are paid at 90th percentile of the plan © 2013
  21. 21. Free resources from my blog 21      http://compensationinsider.com/7-steps-to-compensation http://compensationinsider.com/analyse-my-sip/ http://compensationinsider.com/why-am-i-not-on-the-sal http://compensationinsider.com/why-the-sales-director-h http://compensationinsider.com/prospecting-orexisting-customers-what-do-you-focus-on-in-yoursales-incentive-plan/ © 2013
  22. 22. Thank you ! 22 +971 566 172 864 Sandrine@Compensationinsider.com 240+ free articles on C&B ! Subscribe at : http://CompensationInsider.com Check my profile on LinkedIn for Sandrine Bardot Recommendations, Expertise and Consultant, trainer, free presentations. speaker, blogger © 2013 Twitter : @CompInsider

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